ANNUAL REPORTANNUAL 2014

ANNUAL REPORT 2014 Content Boliden on the map

Introduction Boliden 2014 1 Metals for modern life 2 President’s Statement 4 Aitik The Boliden share 6

Strategy Market and pricing trends 10 The Boliden Area Income model 14 Rönnskär Market position 16 Kokkola Competitiveness 17 Strategic orientation 18 Kylylahti Goals and goal fulfilment 20 Harjavalta Garpenberg Operations This is Boliden – from deposit Odda Stockholm to customer 24 This is exploration 26 How mines work 28 How smelters work 29 Bergsöe How to interpret Boliden’s figures 30 Glostrup The Group 31 Mines 34 Tara Smelters 40 Leamington Spa Purchasing goods and services 46 Neuss Risk management 47

Sustainable Boliden’s employees 54 development Boliden’s environmental work 57 Evaluation of business partners 61 Sustainability Report in accordance with G4 62 Limited Assurance Report 63 Mining areas Financial The Group 66 Tara – zinc and lead reports The Parent Company 70 Garpenberg – zinc, silver, lead, gold, and copper Notes to the accounts 71 The Boliden Area – zinc, copper, gold, silver, tellurium, and lead Proposed allocation of profits 96 Aitik – copper, gold, and silver Kylylahti – copper, zinc, and gold Audit report 97 Smelters Corporate Governance Report 100 Odda – zinc, aluminium fluoride, and sulphuric acid The Board of Directors 104 Bergsöe – lead alloys The Group management 107 Rönnskär – copper, gold, silver, lead, zinc clinker, and sulphuric acid Mineral reserves and Harjavalta – copper, gold, silver, sulphuric acid, and nickel matte ­mineral resources 109 Kokkola – zinc, silver concentrate, and sulphuric acid Definitions 113 Offices Industry concepts and explanations 114 Stockholm – Head Office and Boliden Smelters Ten-year overviews 115 Boliden – Boliden Mines 2015 Annual General Meeting Neuss – Marketing Office and addresses 121 Leamington Spa – Marketing Office Glostrup – Marketing Office

Boliden is a metals company with a commitment to sustainable development. Our roots are Nordic, but our business is global. The company’s core competence is within the fields of exploration, mining, smelting and metals recycling. Boliden has approximately 4,900 employees and an annual turnover of approximately SEK 37 billion. Its share is listed on NASDAQ Stockholm, segment Large Cap.

Boliden’s 2014 Annual Report is published in The GRI Report, together with the complete GRI Swedish and an English translation. The Annual Index has been audited by means of an external limited Report comprises the Directors’ Report on pages assurance engagement. As of 2014, Boliden reports 6–20, 26–51 and 96, financial reports on pages its sustainability work in accordance with the Global 64–95, and elements of Boliden’s Sustainability Reporting Initiative’s (GRI) updated guidelines, G4. The Report on pages 21–25 and pages 52–62. scope of the report is shown on pages 52-63 of the The Annual Report describes Boliden’s financial Annual Report, where references are also made to com- performance and its work on sustainability issues. plementary information available on Boliden’s website. Sustainability is an integral part of Boliden’s opera- For further information on measurement tions. The way in which relevant sustainability ­methodology, definitions and other guidelines, issues are managed and handled exerts a very please contact Boliden’s Information considerable influence on the company’s profitabi- ­Department on tel. +46 8 610 16 30. lity, risk, and value generation ability. www.boliden.com Boliden in 2014

“ Base metals such as copper and zinc are vital to the develop- ment of modern societies. Through the metals we produce, Boliden helps improve the global standard of living while, at the same time, generating value for our owners.”

Lennart Evrell, President and CEO

Important events Key data 2014 2013 Comments • The expansion of the zinc-silver Revenues, SEK m 36,891 34,409 • Revenues increased by 7 per mine at Garpenberg was inau- Operating costs, excl. deprecia- cent as a result of a stronger gurated and production com- tion, SEK m 10,933 10,304 US dollar, a higher zinc price menced. Full capacity of 2.5 Depreciation, SEK m 3,277 2,829 and increased copper sales million tonnes per year will be Operating profit excl. revaluation volumes. achieved by the end of 2015. of process inventory, SEK m 2,605 2,271 • The operating profit excl. • The facility for extracting Operating profit, SEK m 2,759 1,803 revaluation of process inven- ­silver from zinc concentrate Earnings per share, SEK 6.94 4.72 tory increased by 15 per at Kokkola was inaugurated Free cash flow, SEK m 1,583 –1,466 cent. The increase was pri- and production began. Investments, SEK m 4,222 4,974 marily due to a stronger US • The Finnish copper mine, Capital employed, SEK m 35,087 34,451 dollar and increased produc- Kylylahti, was acquired, along Return on capital employed, % 8 5 tion, mainly within Business with exploration rights in the Number of employees, FTE 4,881 4,815 Area Mines. Outokumpu field. Production, Mines 2014 2013 • Free cash flow totalled • An investment of SEK 600 mil- Zinc, tonnes 294,150 271,674 SEK 1,583 million (SEK lion to enable the first steps to Copper, tonnes 78,427 79,302 –1,466 m). The improvement be taken in the expansion of Lead, tonnes 60,765 48,365 was due to higher profit, lower working capital tied up the Aitik mine to an annual Gold, kg 4,379 3,849 and lower investments. production capacity of 45 mil- Gold, troy oz. 140,789 123,759 lion tonnes was approved. Silver, kg 323,325 261,804 • Increased mined production, • The expansion of the Odda Silver, troy oz., ‘000 10,395 8,417 with the exception of copper. zinc smelter to an annual pro- Tellurium, kg 30,917 24,457 Smelters’ production of cop- duction capacity of 200 Kton- per, zinc and precious metals Production, Smelters 2014 2013 nes of zinc was approved. The increased while the produc- facility expects to achieve its Zinc, tonnes 467,624 455,130 tion of lead and lead alloys new capacity level in the latter Copper, tonnes 347,345 324,745 remained relatively stable. half of 2017. Lead, tonnes 24,734 24,039 Lead alloys, tonnes 43,974 44,674 • Refinancing of syndicated cre- Gold, kg 17,368 16,177 dit facility for EUR 850 million, issue of six-year bond loan for Gold, troy oz. 558,382 520,094 1) SEK 500 million, and raising of Silver, kg 626,767 537,941 1) a seven-year loan for SEK 570 Silver, troy oz., ‘0001) 20,151 17,294 Kokkola’s production of silver in con- centrate is included in the production Aluminium fluoride, tonnes 35,270 34,333 million with the Swedish Export figures as of 2014. Credit Corporation. Sulphuric acid, Ktonnes 1,659 1,564

Awards • Niklas Karlsson, Section Manager, Maintenance, at Boliden • Kent Hedin, Production Manager at Boliden Garpenberg, was awarded SveMin’s (the Swedish Association ­Garpenberg, was awarded Atlas Copco’s 2014 of Mines, Minerals and Metal Producers) 2014 Work Environ- Rock Engineering Award for his work in developing ment Prize. more efficient methods for rock excavation and • Boliden’s 2013 Annual Report took first place in the internatio- ­reducing the risk of rock falls, thereby creating safer nal Annual Report of Annual Reports 2014 ranking that com- working areas. pared some 400 annual reports from different companies. INTRODUCTION | Metals for modern life Metals for modern life

Pd Cu Ag Pb Cu Au Catalytic Ag/Au Electronics Batteries Cabling Financial converters Jewellery Conductors

Zn Zn Galvanisation Ni Te Anti-rust Stainless Semi- steel conductors

90 years’ experience Industrial customers in Europe jects designed to increase production and On 10th December 1924, one of the The majority of Boliden’s metals are sold extend lifespans in existing facilities, but ­biggest gold ore deposits of its time was to industrial customers in northern also with a view to starting new opera­ ­discovered at Fågelmyran, in the Swedish Europe. Steelworks, which use zinc to gal­ tions. These investments have been province of Västerbotten. The discovery vanise steel for subsequent use in infra­ financed through internal cash flows. gave rise to both the community and the structure, and the construction and auto­ The total return on the Boliden share company known as Boliden, and the 90 motive industries, are the main customers has outperformed that of the international years since then have seen Boliden establish for Boliden’s zinc. Manufacturers of wire mining index, Euromoney Global Mining, a competitive position in the fields of rod and copper rod, which is used in the in SEK over the most recent ten-, five-, and exploration, mining operations, concen­ construction and automotive industries, three-year periods. This enhances Boliden’s tration, smelting and recycling operations. make up the majority of Boliden’s copper ability to attract the capital and expertise it customers, along with manufacturers of needs for continued growth. Boliden’s Five mines and five smelters electric and electronic components. total return in 2014 was higher than that Boliden’s five mining areas, which are Boliden’s lead is primarily used by battery of both the international mining index home to a total of nine mines, extract manufacturers, while the most important and the OMX Stockholm 30. zinc-, copper-, lead-, gold-, and silver- customers for Boliden’s gold and silver are bearing ores, while the Kankberg mine in the electronics and jewellery industries A long tradition of corporate the Boliden Area also produces tellurium. and the financial sector. responsibility Productivity at the Aitik copper mine and Boliden’s vision is to be a world class the zinc-silver Garpenberg mine is Value generation ­metals company. By this, Boliden means amongst the highest in the world. It is important, for investors, shareholders that it shall be an industry-leader in terms Boliden’s five smelters produce pure and society alike, that Boliden conducts of customer satisfaction, efficiency, and metals, customised alloys and a number of efficient operations that are sustainable in responsibility. Boliden has also clearly by-products. The raw material comprises the long-term. The past ten years have stated its ambition to be the first sustain­ metal concentrates from external mines seen Boliden invest almost SEK 36 billion able link in the metals’ value chain. and the Group’s own mines, plus second­ with the aim of maintaining its opera­ Boliden’s existence and development, ary raw materials such as metal and elec­ tional strength and efficiency of its mines ever since the company was founded in tronic materials and scrap car batteries. and smelters, in the form of, for example, 1924, has relied on its ability to generate The Rönnskär smelter is the world’s lead­ upgrades and the implementation of new value for and to grow hand-in-hand with ing recycler of electronic scrap, while the technology that also results in improved the communities in which its operations Bergsöe smelter is one of the biggest lead environmental performance. Substantial are based. The relationship between the recycling smelters in Europe. investments have also been made in pro­ company and the local communities must

2 BOLIDEN ANNUAL REPORT 2014 INTRODUCTION | Metals for modern life

Metals are an ever-present and vital compo- nent of society. There are virtually no prod- ucts that either contain no metal or where metal has not been used in their production. Base metals such as copper and zinc have Pd Cu a key role to play in those countries that are Ag Pb Cu Au Catalytic Ag/Au experiencing rapid increases in social wel- Cabling Financial Jewellery Conductors Electronics Batteries converters fare and affluence, in that they are essential to buildings, infrastructure, energy systems, automobiles and railways, computers and Zn mobile phones. They are vital to virtually Zn Galvanisation Ni Te everything­ we do and an increase in the pro- Anti-rust Stainless Semi- duction of base metals is therefore a pre- steel conductors requisite of societal development in the world’s emerging economies. Metals are, however, unique in that they can be recycled over and over again by being smelted down and turned into new products. Boliden is ­currently one of the world’s leading recyclers of electronic materials and firmly believes that recycling will become an increasingly important source of metals, particularly in mature economies.

be characterised by respect and consider­ ability issues, and formulating new sus­ contributed to the development of ation for different interests and rights. tainability goals. Boliden’s reporting in accordance with The relationship with its neighbours and The guiding light of the CR strategy is the GRI’s latest guidelines, G4. the local communities is particularly sig­ a vision of an accident-free workplace, of nificant for a company such as Boliden in zero environmental accidents, and zero Prioritised sustainability issues that Boliden is a major employer in many tolerance for corruption. The strategy Identifying and focusing on the most of the communities in which the com­ also emphasises the importance of leader­ important and relevant challenges in the pany operates, and hence contributes to ship development and dialogue. context of our sustainability work is an economic growth and fundamental soci­ ongoing process. The common denomina­ etal services. Dialogue on prioritised tor for the areas that Boliden has chosen to Mega-trends such as climate change, sustainability issues prioritise is that they have both a direct resource shortages, digitalisation, urbani­ A more extensive programme of stake­ impact on Boliden’s success and a signifi­ sation, and demographic changes all holder dialogue was initiated in 2014 in cant impact on Boliden’s stakeholders. The affect Boliden’s operations. The past two order to analyse and confirm Boliden’s most important sustainability issues and years have also seen a particularly lively prioritised sustainability issues. The fol­ starting points for the company’s sustain­ debate in Boliden’s operating regions on lowing stakeholder groups were initially ability goals for 2013−2018 are: the subject of the overall conditions for invited: • Create a safe work environment and the mining industry and its impact on • Employees healthy employees communities and the environment. • Customers • Secure the future talent pool For Boliden, which is characterised by a • Neighbours • Build diversity and establish a better long-term approach and stability, it has • Investors gender balance become particularly important to convey • Authorities • Minimise our impact on the soil, clearly the values that the company holds The stakeholders confirmed Boliden’s pri­ the air and the water and the ways in which the company dif­ orities, but also suggested ways in which • Make efficient use of resources fers from other operators. Boliden can develop these prioritised • Work with reclamation and nature issues and provide greater transparency in conservation Strategy and focus its sustainability work. Boliden is seen as Find out more about Boliden’s sustain­ Boliden developed its strategy for Corpo­ a role model, but can do more to further ability goals, work and results on page 21 rate Responsibility (CR) in 2013 and promote corporate responsibility and pages 52−63 and in Boliden’s 2014 2014 by engaging in systematic dialogues amongst customers and suppliers. The GRI Report, which is available on with prioritised stakeholders, refining its stakeholder dialogues formed part of Boliden’s website. analyses of the most important sustain­ Boliden’s materiality analysis and have

BOLIDEN ANNUAL REPORT 2014 3 INTRODUCTION | President’s Statement President’s Statement

Boliden has, in recent years, invested in increased efficiency, expansions and acquisitions, and thereby increased metal production both from mines and from recycled materials. The market outlook for the next few years suggests weaker growth in the global economy but Boliden, with its broad metals mix and production by both mines and smelters, is ­well-positioned to handle the market’s fluctuations.

An eventful year similar geologies in the Skellefte field. Finland’s geology is as 2014 was an eventful year for Boliden. The Aitik copper-gold interesting as that of Sweden in terms of base metals, and Fin­ mine produced 39 million tonnes of ore – the goal we had previ­ land also has deep-rooted traditions in the mining and metals ously set for the year was 36 million tonnes – and a decision to industry. Boliden was already a major player in the Finnish basic invest in a further expansion that will increase the annual pro­ industries sector, thanks to its acquisition of the Kokkola and duction rate to 45 million tonnes of ore by 2017 was approved. Harjavalta smelters in 2003, and the addition of Kylylahti The expansion investments at the Garpenberg zinc-silver mine strengthens this position still further. entered their final phase with the first concentrate delivered from the new concentrator in March. The plan is to reach an annual Market trends and challenges production level of 2.5 million tonnes of ore by the end of 2015. In 2014, almost half of the world’s population lived in towns and The investment projects at Aitik and Garpenberg have not only cities, and the trend towards increased urbanisation is continu­ increased capacity, they have resulted in improvements in logis­ ing. Boliden’s metals – copper and zinc – are fundamental to tics, metallurgy and automation, making the two mines the most meeting the growing need for infrastructure, automobiles, trains, productive mines in the world in their respective spheres.* housing, washing machines and mobile phones. The industrial­ The Harjavalta and Odda smelters set new production ised world also needs large amounts of metals to effect a transi­ records during the year, thanks to investments in eliminating tion to renewable energy sources and more efficient energy sys­ bottlenecks and long-term efforts to increase process efficiency tems, in modern communication methods and information and improve flexibility. The technology, in electric cars, and success of previous improve­ All the major projects we have in the development of all types of ment programmes, coupled conducted in recent years are the sustainability improvement sys­ with a positive outlook on the tems. A unique aspect of metals is zinc market, resulted in the result of cutting-edge expertise that they can be recycled any decision to invest in a new and market-leading technology, number of times, and Boliden’s expansion project at the Odda coupled with a systematic method- strategy is based on the fact that smelter. The year was rounded ology for conducting projects with much more of the mature econo­ off with the inauguration of a mies’ metal requirements could new silver extraction facility at standardised processes. be met through recycling – an the Kokkola zinc smelter. approach that uses the metals In parallel with these expansion projects, we have been work­ needed to replace old cars, phones or energy systems, rather than ing hard on measures designed to increase operational efficiency to increase the number of units per head of population. The pop­ and cut costs – measures which have yielded very pleasing ulations of emerging economies, however, do not have an old results in a number of cases, at the Tara zinc mine and the phone or car to hand in for recycling. They are buying their first Rönnskär copper smelter for example. We have also developed such devices and it is, therefore, vital from a global perspective, to our corporate responsibility (CR) strategy, placing considerable combine primary metal production with metal recycling. We call emphasis on safer workplaces and an improved environmental this two-pronged approach “mining and urban mining”. performance. In spite of these efforts, however, two serious acci­ The growth in demand for base metals has been stable for sev­ dents did occur, neither of which, fortunately, resulted in any eral decades now, but the industry is characterised by periodic personal injuries or environmental damage. The first of these sharp fluctuations in pricing. The industry is capital-intensive, accidents was an underground fire at the Tara mine in Ireland. changes in production capacity have long lead times, and rela­ The second was a breakdown in a leaching tank at the Kokkola tively small surpluses or deficits in the global market trigger smelter in Finland. Boliden takes these incidents very seriously strong price reactions. The recent fall in metal prices is due to a and Group-wide risk reviews have been launched. combination of lower global growth rates, the expansion of sev­ 2014 also saw Boliden’s acquisition of the Finnish copper eral existing mines and the opening of many new ones. mine, Kylylahti, and extensive exploration rights in the Outo­ The trend indicates a post-2016 shortfall in zinc concentrate, kumpu field in eastern Finland. The acquisition offers synergies and this is expected to result in a better price trend than for in terms of our mining operations, metallurgy and exploration many other metals. As for copper, the existing surplus on the work, largely thanks to Boliden’s expertise and experience of mining side is expected to last for a number of years. Overall,

* Wood Mackenzie Jan 2015

4 BOLIDEN ANNUAL REPORT 2014 INTRODUCTION | President’s Statement

current market conditions are bringing about a downturn in mines’ profitability but may well benefit smelters.

Operating profit Boliden posted an operating profit for 2014 of SEK 2,759 million as a result of higher volumes within both Mines and Smelters, higher zinc prices, better treatment and refining charges, and a favourable exchange rate climate. The Group’s combined costs rose, year on year, due to higher production volumes. Boliden’s increased focus on procurement has resulted in moderate cost increases, volume effects excluded. Our exploration efforts have generated increases in mineral reserves and extended our mines’ lifespans, while simultaneously enabling lower grade ores to be extracted profitably. These successes, coupled with the investments we have made, have enabled Boliden to develop into a company that reports steady years of profit, rather than a company that posts individual high profit years.

How Boliden works Ongoing improvement work seldom gives rise to huge headlines, but for a raw materials company in an investment-heavy sector, successful project that will help boost Boliden’s profits for high productivity and low costs are the key to success. many years to come. Boliden’s strategy is founded on improvement work structured and implemented in accordance with the New Boliden Way – The next 90 years our model for leadership and operations management. The work We celebrated Boliden’s 90th anniversary in a number of different is based on all employees being well-informed and participating ways in 2014. We have come a long way from where Boliden in our efforts to cut costs, stabilise processes, and cut out anything started – the rich gold deposit discovered in Fågelmyran in Väster­ and everything that does not help boost our competitiveness. The botten in 1924. The Group now comprises nine mines in five work focuses on starting by making inexpensive, simple changes mining areas and five smelters. Two of the mines – Aitik and and then moving on to bigger and often more complex projects. Garpenberg – are world leaders in terms of productivity, and the Small investments often target the eradication of bottlenecks that Rönnskär smelter is the world’s leading recycler of electronic are relatively­ easy to eliminate. The P100 project carried out at the materials. All the major projects we have conducted in recent Odda smelter between 2011 and 2013 is a good example of an years – Aitik 36, Rönnskär, Kankberg and Garpenberg – have important bottleneck elimination that yielded big returns. Odda been completed according to plan and most were also within has performed well since the project was concluded and in 2014, budget. They are all the result of cutting-edge expertise and market- the return on capital employed at the smelter exceeded 15 per leading technology, coupled with a systematic methodology for cent, and this led, in turn, to the decision to invest a further NOK conducting massive projects with standardised processes. 350 million in a new bottleneck elimination project.Boliden is Base metals such as copper and zinc have a key part to play in continuing to work with similar efficiency enhancing and remedial today’s society. For a capital-intensive company with long lead action programmes at other units, including the Rönnskär copper times, operating in a volatile sector, it is vital to have a stable base smelter and the Tara zinc mine. Rönnskär expects to make per and maintain a steady course. Boliden’s current position is not annum improvements in the operating profit of SEK 275 million about coincidences and chance: it is the result of advance plan­ by 2017, taking 2013 as the base year, by cutting costs and invest­ ning, taking a long-term view, and the contributions of an ing in increased process stability. At Tara, a remedial action pro­ extremely dedicated workforce. This is the spirit in which we will gramme over the past two years has resulted in a reduction in the continue to work and we look forward to yet another interesting workforce from 700 to under 600. and challenging year. The initial profitability of very large investments is often low, but they do bring about numerous smaller but extremely profit­ Stockholm, February 2015 able bottleneck investments in their wake. Aitik 36, which was inaugurated in 2010, was Boliden’s biggest ever project, and after a few years of fine-tuning, the concentrator’s capacity is now higher than anticipated and we are currently making a number of small investments and improvements that will increase production there further still. The newly inaugurated Garpenberg expansion is Boliden’s Lennart Evrell ­second biggest ever investment and has proved to be an extremely President & CEO

BOLIDEN ANNUAL REPORT 2014 5 INTRODUCTION | The Boliden share The Boliden share

The Boliden share is listed on the NASDAQ Stockholm Exchange in the Large Cap segment. The share price rose by 27 per cent during the year and consequently outperformed both the Stockholm Stock Exchange and the sector index.

Trading in the Boliden share during the year has primarily benefitted Share capital A total of 1.3 billion Boliden shares with from the trend in zinc prices and TC/RC There are a total of 273,511,169 Boliden a total value of SEK 137 billion were and from favourable exchange rates. shares. Every share has a nominal value of traded in all marketplaces in 2014. At the end of 2014, the Boliden share SEK 2.12 and the share capital totals NASDAQ Stockholm accounted for was quoted at SEK 125.50 (SEK 98.45) SEK 578,914,338. Boliden’s share capital 53 per cent of the trading in the Boliden on the NASDAQ Stockholm, corre­ comprises a single class of share in which share. Trading in the Boliden share on the sponding to a market capitalisation of every share has the same voting power NASDAQ Stockholm rose in 2014, with SEK 34.3 billion (SEK 26.9 b). In com­ and grants the same entitlement to divi­ a total of 657 million (587 m) shares mon with other raw materials companies, dends. The Boliden Articles of Associa­ traded at a value of SEK 70 billion (SEK the variation in the value of the Boliden tion contain no provisions restricting 58 b). An average of 2.6 million (2.3 m) share is, on average, greater than for the the right to transfer shares or any limita­ shares were traded per trading day on the broad stock market indices. The beta tions with regard to the number of votes NASDAQ Stockholm. The Boliden share value of the Boliden share over the last that a shareholder can exercise at General accounted for 2.1 per cent (2.0%) of the five years against OMXSPI is 1.50. Meetings of the company’s shareholders. total number of shares traded on the The Board of Directors proposes to the Boliden does not hold any of its own NASDAQ Stockholm. Annual General Meeting that a dividend shares, nor has it issued any shares in The largest marketplace after NASDAQ of SEK 2.25 (SEK 1.75) per share be paid 2014. Stockholm was BATS Chi-X Europe, for 2014. The proposed dividend corre­ Boliden is unaware of any agreement which accounted for 33 per cent of the sponds to 32.4 per cent (37.0%) of the between shareholders that may entail trading in the share. net earnings per share and a dividend restrictions on the right to transfer shares yield of 1.8 per cent (1.8%), calculated on in the company. Boliden is not party to Price trend and dividend the basis of the share price at the end of any significant agreement affected by any The price of the Boliden share rose by 27 the year. public buyout offer. Boliden has no share­ per cent, in contrast to the Euromoney The Boliden share’s total return (the holders who, either directly or indirectly, Global Mining Index in SEK, which fell sum of the dividend paid and the price represent at least one tenth of the total by 3 per cent. The OMX Stockholm 30 trend) over the most recent 10-year period number of votes for all shares. index rose by 10 per cent. The price trend was, on average, 20 per cent per annum.

Share price, sector index and OMX

Index Number of shares, millions 800 500 Share price, sector index and NASDAQ 700 Stockholm. The share 400 price rose by 27 per 600 cent during the year and consequently out- 500 300 performed both the Euro­money Global Min- 400 ing sector index in SEK, 200 which fell by 3 per cent, 300 and the OMX Stockholm 200 30 total index, which 100 rose by 10 per cent. 100

0 0 Source: Reuters Datastream 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Euromoney Global Mining, SEK Number of shares traded per month OMX Stockholm 30 (OMXS30) Boliden

6 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT INTRODUCTION | The Boliden share

Ownership structure Distribution of Boliden shares on 31st December 2014 Boliden had 77,965 (90,963) registered Number of Number of shareholders on 31st December 2014. Shareholding shareholders shares Holding, % Votes, % Approximately 59 per cent (41%) of 1 – 500 60,614 9,354,308 3.4 3.4 the shares were owned by foreign share­ 501 – 1 000 8,806 7,532,063 2.8 2.8 holders. The ten biggest single share­ 1 001 – 5 000 6,836 15,497,857 5.7 5.7 holders represent 25 per cent of the 5 001 – 10 000 737 5,605,399 2.1 2.1 10 001 – 50 000 576 12,993,192 4.8 4.8 share capital. 50 001 – 100 000 124 9,092,109 3.3 3.3 Boliden’s employees hold shares, via 100 001 – 272 213,436,241 78.0 78.0 profit sharing foundations, for which Total 77,965 273,511,169 100.0 100.0 voting rights cannot be directly exer­ Source: SIS Ägarservice cised. The foundations held 338,613 Boliden’s 10 biggest owners The share in brief (700,113) shares at the end of the year. on 31st December 2014 Marketplace NASDAQ Stockholm The table to the right shows Boliden’s Percentage of capital and votes, % Short name BOL ownership structure on 31st December Norges Bank Investment ISIN code SE 0000869646 ­Management 6.5 2014. ICB code 1700 BlackRock Inc. 5.0 Highest price paid, 2014 SEK 129.90 SHB fonder 2.8 Shareholder information Lowest price paid, 2014 SEK 90.70 Swedbank Robur fonder 2.8 on the website Closing price, 2014 SEK 125.50 AFA Försäkring 1.8 Boliden’s website, www.boliden.com, Market capitalisation, Söderbloms Factoringtjänst AB 1.7 provides information on Boliden, the 31st Dec. 2014 SEK 34.3 billion Fidelity fonder 1.4 Turnover rate, 2014 237% performance of the Boliden share, Danske Invest fonder (Sweden) 1.2 Number of shares 273,511,169 metal prices and currencies, and finan­ Seatown Master Fund 1.1 Beta value (5 years) 1.50 cial reports, a list of the analysts who Första AP Fonden 0.9 Source: NASDAQ Stockholm monitor Boliden, and details of how to Total 25.2 contact Boliden. Presentations of Source: SIS Ägarservice Interim Reports and capital market days are also available on the website. Annual total shareholder return on 31st December 2014 1 yr. 3 yr. 5 yr. 10 yr. Boliden 30% 11% 10% 20% OMX Stockholm 30 14% 18% 13% 11% Euromoney Global­ Mining, SEK 0% –10% –8% 7%

The average total shareholder return on the Boliden share over the past 10 years was 20 per cent per annum and 535 per cent for the period as a whole. Boliden’s annual total share- holder return has outperformed the international mining index in all of the one-, three-, five-, and ten-year periods. The annual total shareholder return has, furthermore, outperformed the OMX Stockholm 30 index during the one- and ten-year periods, but was outperformed by that index during the three- and five- year periods. Source: Reuters Datastream

Trading in different Ownership by country Ownership by category Trading in different marketplaces marketplaces. Stock market trading accounts for 60 per cent of all trade in the shares that make up the OMXS30 index. The corresponding figure for the Boliden share is 67 per cent.

Ownership by country. The percentage of foreign- owned shares increased NASDAQ Stockholm, 53% Sweden, 41% Foreign companies, 59% during the year and BATS Chi-X Europe, 33% USA, 28% Swedish institutional totalled approximately Boat, 6% Norway, 7% ­investors, 12% 59 per cent at the end Turquoise, 3% UK, 5% Swedish equity funds, 11% of the year. LSE, 2% Other, 19% Swedish private persons Other, 3% incl. close companies, 18% Source: Fidessa Source: SIS Ägarservice Source: SIS Ägarservice

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 7 Strategy

Boliden endeavours to maintain a leading position among medium-sized metals companies by operating com- petitive mines and smelters and by being the natural choice for business partners.

Contents Market and pricing trends 10 Income model 14 Boliden’s market position 16 Competitiveness 17 Strategic orientation 18 Goals and goal fulfilment 20 Janne Narkilahti, Process Operator at ­industry can be alloyed with aluminium, Boliden’s zinc smelter, Kokkola, in the nickel, magnesium and copper. process of lifting a 4,000 kg zinc jumbo Boliden’s products include zinc ingots (left). Boliden produced 468,000 tonnes and jumbos that meet the quality of zinc metal in 2014. require­ments for Special High Grade More than half of the zinc used globally (SHG) with a minimum of 99.995 per goes to galvanisation – protection of cent purity. The end-users of zinc are steel against corrosion. A thin coating of in the automotive and construction zinc on steel is enough to fight rust for industries, such as in the construction over 50 years. Zinc for steel galvanisa- of this new building. tion, die-casting or use in the brass STRATEGY | Market and pricing trends Market and pricing trends Global demand for metals is driven by the population growth and urbanisation that goes hand- in-hand with economic growth and increasing prosperity in more and more parts of the world. Housing and infrastructure investments – both of which require base metals – are increasing. The average trend on base metal prices varied from one metal to another during the year, with zinc prices rising, while copper, gold, silver and lead prices fell. Treatment and refining charges for copper and zinc rose in 2014.

The demand for metals grows most rapidly in countries where the GDP per capita rises in the interval from USD 5,000 to USD 15,000 as societies develop from agricultural to industrial econo­ mies. Approximately one third of the world’s population lives in countries where the per capita GDP is within this range.1) A high percentage still lives in countries with a per capita GDP of less than USD 5,000 and hence offer substantial potential for a sharp growth in demand for metals in future. Demand for metals in mature economies is relatively constant, and still accounts for a significant percentage of the global estate development increased, but the number of new construc­ demand for metals. tion projects launched was lower than in 2013, with a downward pressure on property prices in the major cities. Market trends in 2014 Global GDP is estimated to have risen by 3.3 per cent in 2014 in The automotive market a growth rate on a par with the previous year. Growth levels in Automotive production increased globally, but the growth rate mature economies were 1.8 per cent (1.4%), while in developing was slightly lower than in the previous year. Automotive produc­ countries, growth levels were 4.4 per cent (4.7%). Growth levels tion in Europe increased in comparison with 2013 as a whole, in the EU and the USA rose to 1.4 per cent (0.2%) and 2.4 per but remained unchanged in the latter half of the year in compari­ cent (2.2%), respectively. China’s growth rate is calculated to son with the corresponding period in 2013. Production in the have been slightly lower than in 2013, down from 7.8 per cent USA increased for the fifth year in succession, albeit at a slower to 7.4 per cent. rate than in 2013. Demand for Boliden’s main metals, zinc and copper, is driven primarily by trends in the construction industry, with the empha­ Metal prices sis on infrastructural projects, the transport sector and industrial Copper, zinc and lead prices are set daily on the London Metal activity levels. China is the biggest market for base metals. Exchange (LME), while gold and silver prices are set daily by the London Bullion Market Association (LBMA), which is a collabo­ Industrial activity rative organisation for parties trading in the market. The combined global industrial activity level is held to have been high during the first six months of the year, but to have decreased Concentrate market trends slightly in the latter six months. European industrial activity lev­ The balance between the supply of concentrate from the world’s els rose during the first half of the year, but levelled off during the mines and the smelters’ demand for mined concentrate determines latter half, while in the USA, the rate of increase remained high the prices and terms between mines and smelters. Smelters’ income throughout the year. Growth levels continued to be high in is derived from treatment and refining charges, the metals that can China in comparison with the previous year, but did slow down be extracted in excess of the amount paid by the smelters to the slightly during the year. mines, and other by-products. When concentrate is widely available across the market, treatment and refining charges normally rise, The construction market while the reverse applies when concentrate is in short supply. Construction investments are adjudged to have risen on a global scale in comparison with the previous year. Activity levels in the Metal premiums’ trend European construction market rose from a low level. The recov­ Boliden’s main metals – zinc and copper – are primarily sold to ery by the USA’s construction sector was in its third year, still industrial customers in Europe. The regional balance between the from a low level. Infrastructural investments in mature econo­ demand for metals and smelter capacity, coupled with shipping mies have remained at a low level. Construction activity levels in costs and terms of payment, determine the level of metal premi­ China remained high, but the rate of growth in construction- ums, which comprise local surcharges on the metal prices set on related investments was lower than during the previous year. Real the LME.

1) International Monetary Fund, October 2014.

10 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT STRATEGY | Market and pricing trends

Zinc

Demand trend The zinc market The average price of zinc on the LME rose by 13 per cent in Mtonnes of metal ­comparison with 2013. The price was stable during the spring, 14 rising in the summer to a peak of almost USD 2,400/tonne. 12 The price subsequently fell slightly, and by the end of the year, it was USD 2,167/tonne, corresponding to a year on year price 10 rise of 4 per cent. 8 Global demand for zinc increased by approximately 3 per cent in 2014 to just under 13.4 million tonnes. Demand in China 6 increased by 4 per cent to 6.0 million tonnes, corresponding to 4 approximately 45 per cent (45%) of global consumption. Demand elsewhere in the world increased by just under 2 per cent. Mature 2 economies saw a strong growth in demand during the first six

0 Source: CRU, Jan. 2015 months of the year but lower growth during the latter half of the 05 06 07 08 09 10 11 12 13 14 year due to lower levels of industrial activity. Global metal demand Global production of zinc metal by zinc smelters totalled approximately 13.2 million tonnes, corresponding to a year on year increase of just under 3 per cent and due, in the main, to an Price trend 8 per cent increase in production in China. China’s share of global production increased to 43 per cent (40%). Production levels in USD/tonne mature economies were on a par with levels in 2013, while in 5,000 developing countries (with the exception of China), levels fell by just under 3 per cent, largely due to the 9 per cent fall in production 4,000 in India, where concentrate supply was limited by sharply falling levels of mined production. 3,000 Global mined production of zinc concentrate remained on a par with levels in 2013. China reported moderate growth in 2,000 ­production in 2014 after several years of high levels of production growth. Production in the rest of the world collectively fell slightly. 1,000 Production did increase slightly in Europe and North America, and remained unchanged in South America, but fell sharply in Asia, 0 Source: Thomson Reuters 05 06 07 08 09 10 11 12 13 14 with the exception of China, primarily due to substantially lower production levels in India. Price (LME) European metal premiums European spot metal premiums The European contract premiums for zinc remained on a par with those in 2013. The European spot market premiums increased to USD/tonne of metal approximately USD 157 (USD 142) per tonne of metal, but fell 400 slightly towards the end of the year.

350 Treatment charges 300 Smelters’ demand for concentrate outstripped mined production, 250 but the spot market treatment charges rose in 2014 due to the presence of inventories in the market. The annual treatment 200 charge negotiations in 2014 resulted in benchmark contracts 150 with a higher price level than in the previous year and the price 100 sharing clauses that apply between zinc mines and smelters 50 resulted in the realised treatment charges rising by a total of

Source: CRU, Jan. 2015 12 per cent in comparison with 2013 as a whole. The margin 0 05 06 07 08 09 10 11 12 13 14 between realised treatment charges in benchmark contracts and spot market treatment charges shrank in 2014, particularly European spot metal premiums, zinc, ex-works in Europe.

Treatment charges (TC)

USD/tonne of concentrate 600

500

400

300

200

100

0

05 06 07 08 09 10 11 12 13 14 Source: CRU, Jan. 2015

Spot market, Benchmark contracts, zinc TC − outcome zinc TC, realised

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 11 STRATEGY | Market and pricing trends

Copper

Demand trend The copper market The average price of copper on the LME fell by 6 per cent in 2014, Mtonnes of metal year on year. The price fell sharply at the beginning of the year but 25 recovered by the halfway point of the year, only to fall once again, and by the end of 2014, the price was USD 6,359 per tonne, cor- 20 responding to a 14 per cent fall, year on year. Global demand for copper increased by just under 4 per cent, 15 year on year, to approximately 21.4 million tonnes. Demand in China increased by 5.5 per cent, and by just over 2 per cent in the 10 rest of the world. The growth in demand in mature economies was high during the first nine months but low in the fourth quarter due 5 to lower industrial activity growth rates. Demand in China totalled approximately 9.5 million tonnes and accounted for 44 per cent 0 Source: CRU, Jan. 2015 (44%) of global demand. 05 06 07 08 09 10 11 12 13 14 Global production of copper metal by smelters and refineries Global metal demand increased by approximately 5 per cent, year on year, and totalled approximately 21.6 million tonnes. Production increased in all regions with the exception of South and Central America, where Price trend production levels fell slightly. Production in China increased by 10 per cent and totalled approximately 6.8 million tonnes of copper in USD/tonne 2014. China’s share of global production was just under 32 per 12,000 cent (30%). Global mined production of copper concentrate increased by 10,000 just under 2 per cent, year on year. The launch of new mining pro- 8,000 jects proceeded more slowly than anticipated and Indonesia intro- duced duties on raw material exports at the beginning of the year. 6,000 Several mining projects were launched in South America, resulting in an increase in production of just over 3 per cent. The rate of 4,000 increase was, however, lower than anticipated due to production 2,000 disruptions. Production in Asia remained unchanged, including a fall of approximately 21 per cent in Indonesia in the wake of the 0 Source: Thomson Reuters country’s introduction of export taxes on raw materials. 05 06 07 08 09 10 11 12 13 14 Price (LME) European metal premiums European contract premiums for copper rose in comparison with 2013 due to copper metal being in short supply in Europe in the European metal premiums run-up to 2014. European spot market premiums remained high USD/tonne of metal in the spring, but then fell quickly as market availability of the metal increased. 200 175 Treatment and refining charges 150 Levels of concentrate production by the mines was on a par with 125 levels of smelter production during the year, but it is thought that market stockpiles existed that were unavailable at the beginning of 100 the year. Sport market treatment charges fell slightly in the spring 75 but rose once more during the fourth quarter as the availability of 50 mined concentrate increased. Spot price levels at the end of the 25 year were slightly higher than in the benchmark yearly and half- yearly contracts. The benchmark contracts negotiated for 2014 0 Source: CRU, Jan. 2015 05 06 07 08 09 10 11 12 13 14 totalled approximately USD 92 (USD 70) per tonne of concentrate in treatment charges and USc 9.20 (USc 7.00) per pound in refin- Spot metal premiums, Copper metal premiums, ing charges. copper, CIF Europe European benchmark contracts New benchmark contracts for 2015 were set at approximately USD 107 per tonne at the end of the year. Treatment charges (TC)

USD/tonne of concentrate 200

150

100

50

0 Source: CRU, Jan. 2015 05 06 07 08 09 10 11 12 13 14 Spot market, copper TC Copper TC – benchmark contracts

12 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT STRATEGY | Market and pricing trends

Lead Gold and silver

The average LME price of lead fell by 2 per cent in 2014, and by the The average price of gold fell by 10 per cent in 2014 and by the end of end of the year, had reached USD 1,853 per tonne, corresponding to the year, the price was USD 1,199 per troy ounce, which was on a par a fall of 16 per cent in comparison with the end of 2013. with the corresponding period in the previous year. Gold has long been Approximately half of the world’s demand for lead is met through an important asset class among financial investors and is often metal recycling and changes in the mined production of lead have less of regarded as a lower risk option in conjunction with a weak global econ- an effect on the market balance than is the case for other base metals. omy and geopolitical uncertainty. Interest in gold as an investment alter- Global demand for lead metal increased by just over 2 per cent to native declined in both 2013 and 2014. 11.1 million tonnes. Demand in China increased by just over 3 per The price of silver was, on average, 20 per cent lower than in 2013 cent, and by just over 1 per cent elsewhere in the world. The demand and by the end of the year, the price was USD 16 per troy ounce, cor­ for lead for automotive batteries, both for new cars and for the responding to a year on year fall of 18 per cent. The supply of silver replacement market, increased. from mines and metal recycling has, for many years, exceeded demand The supply of mined lead metal concentrate tracks, to some extent, from the manufacturing and jewellery industries, but prior to 2012, the mined production of zinc as lead is a by-product metal for many zinc the surplus­ was taken up by financial investors. The subsequent decline mines. Global mined production increased by approximately 1 per cent in interest on the part of financial investors has resulted in a fall in the in comparison with 2013 and there was a small surplus of concentrate. price of silver between 2012 and 2014.

Price trend Price trend

USD/tonne USD/troy oz. USD/troy oz. 5,000 2,500 50

4,000 2,000 40

3,000 1,500 30

2,000 1,000 20

1,000 500 10

0 Source: Thomson Reuters

0 0 Source: Thomson Reuters 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14

Price (LME) Gold (LBMA) (left axis) Silver (LBMA) (right axis)

By-products Exchange rates

Sulphuric acid is a by-product of the smelting process (primarily at Boliden’s revenues and costs for raw materials purchases are largely in copper smelters) and is mainly used in the fertiliser, pulp/paper, USD, while its other costs are mainly in SEK, EUR and NOK, and the USD mining and petrochemical industries. Sulphuric acid must be stored exchange rate consequently has a significant effect on the Group’s operat- in special tanks and it is vital, therefore, that smelters have an outlet ing profit. The Swedish krona continued to strengthen slightly against the for their sulphuric acid production and that there is a balance US dollar during the first quarter of 2014, but then weakened substan- between demand for metal and sulphuric acid. tially in the wake of the ECB’s launch of new stimulus packages in early Demand for sulphuric acid in northern Europe was stable during May. A softer approach on the part of the ECB as the US economy’s per- the year in Boliden’s key customer segments and the average prices formance strengthened, coupled with less vigorous stimulus measures, were on a par with those seen last year. The average prices on the resulted in a strengthening by the US dollar. The US economy’s outper- northern European contract market were also on a par with last formance of the European one resulted in a fall in the EUR/USD exchange year’s levels, according to the analysis company, CRU, at EUR 67 rate of 12 per cent during the year from 1.38 to 1.21. (EUR 69) per tonne. The Swedish Riksbank’s interest policy was considerably more expan- sive than the market had expected during the year, and the policy rate Price trend – sulphuric acid was cut from 0.75 per cent to 0.00 per cent. The USD/SEK exchange EUR/tonne rate, which was 6.48 at the beginning of the year, had risen to 7.81 by the end of 2014. The euro strengthened against the Swedish krona by 160 7.0 per cent from the level at the beginning of the year to 9.47 and the 140 US dollar was an average of 5.0 per cent stronger against the Swedish 120 krona and remained unchanged against the euro. 100 Exchange rate trend 80 index 60 150 40 EUR/SEK 125 20 USD/SEK 0 Source: CRU, Jan. 2015 100 EUR/USD 05 06 07 08 09 10 11 12 13 14 75 Sulphuric acid cfr NW Europe, 6-month contracts 50

25

0 Source: Thomson Reuters 05 06 07 08 09 10 11 12 13 14 EUR/SEK USD/SEK EUR/USD

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 13 STRATEGY | Income model Income model

The metals market comprises two sub-markets, namely the market for concentrates (raw materials), where mines and smelters are the market players, and the market for finished­ metals, where smelters and metal buyers are the market players. Boliden operates in both of these markets.

All sales of metal concentrate between of the established metal prices and the which corresponds to the difference Boliden’s mines and smelters are made on amount of payable metals that they con­ between the amount of metal actually market terms. Boliden’s mines and smelt­ tain. The metal price is determined by extracted and payable metal content in the ers benefit from a number of synergies the market price on the London Metal concentrates supplied by the mines and when it comes to metallurgy and market­ Exchange (LME) for base metals and for which the smelter has paid. A metal ing, e.g. improvements to the ways in the London Bullion Market Association premium is usually charged in conjunc­ which plans and investments are adapted (LBMA) for precious metals. Deductions tion with the sale of finished metals and in line with future market trends and for treatment and refining charges (TC/ the premium is, consequently, also part of with natural changes in the mines’ metal RC) and impurities (penalty charges) are the gross profit. The premium is deter­ mixes. There are numerous similarities made from the payable metal value of the mined by regional supply and demand between concentration and smelting pro­ concentrates and it is these factors, and includes such factors as transporta­ cesses and the cooperation between together with the metal prices, that deter­ tion, special alloys and payment terms. smelters and mines helps develop mine the prices paid and charged by the Boliden sells most of its metals directly to Boliden’s technical expertise. Supplying mines and smelters. The payability in industrial customers at a premium under the company’s smelters with the compa­ terms of the metal content, TC/RC levels, contracts negotiated on an annual basis. ny’s own raw materials also offers advan­ and impurities is determined via negotia­ These customer relationships are impor­ tages in the form of lower transport costs, tions between mines and smelters and is tant to Boliden because they not only more reliable deliveries and revenues, and determined by the global balance ensure more reliable demand, but help a reduced need for stockpiling. between mined production and smelters’ establish a stable cash flow. demand for raw materials. The smelters’ gross profit is also affected The mines’ gross profit by the sale of by-products extracted during The bases for the mines’ gross profit are The smelters’ gross profit processing. The biggest by-product is the value of the metal concentrates pro­ The smelters’ gross profit comprises treat­ ­sulphuric acid, but aluminium fluoride, duced. Boliden’s concentrates primarily ment and refining charges and remunera­ sulphur dioxide, copper sulphate, nickel contain copper, zinc, lead, gold and silver tion for impurities. The gross profit also sulphate, cadmium and selenium are and their value is determined on the basis includes what is known as free metals and other important by-products.

How the metal value is divided between mines and smelters (not to scale)

Free metals By-products Smelters’ share Treatment and refining Metal premium charges (TC/RC)

Metals in Free metals concentrate­

Mines’ Mines’ share gross profits Treatment and refining charges (TC/RC)

Metal value Smelters’ gross profits

14 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT STRATEGY | Income model

The metals market’s cyclic pattern The metal markets’ price cycle is determined by the balance between the global supply of metals and global metal demand. Global mined production has, for many years now, limited supply, but the last two years have seen the opening of several new copper mines and the expansion of several others. A number of new smelters have also been built, particularly in China, but capacity utilisation levels have been lower than normal in recent years due to poor profitability. This balance affects both the price level on the metal exchanges where base metals are traded and the treatment and refining charges that form the basis for the pricing structure between the smelters and the mines. Mines have a limited lifespan and the supply will conse­ quently decline if new mines are not made operational. An increase in mine capacity requires assumptions with regard to satisfactorily high future prices in order to ensure that the mining companies’ profitability requirements are met. When metal prices fall, the mining companies’ incentives to develop new mines decline and a number of mines with high cash costs will be closed, at least temporarily. This results in limita­ tions on mined production which halts the fall in metal prices, but means that treatment and refining charges fall and the smelters’ profitability is threatened. This results, in turn, in production cuts or the closure of smelters, which leads to improved terms for the remaining smelters. A reduction or stagnation in metal supply results, in the long-term, in rising market prices for metals. When the demand for metal then rises as the economic ­climate improves, metal prices and treatment charges rise. The base metals market’s income components And after a period with higher metal prices and growing profit­ LME price A ability, the mining companies will decide once again to The concentrate’s payable metal content B Treatment charge (TC), metal concentrate C expand mine capacity. Refining charge (RC), payable metal content D Fees for impurities in the metal concentrates (penalty charges) E Extractable metal (recovery) F The metals market’s cyclic pattern Income from the extraction of by-products in the smelting concentrate­ G Metal premiums H LOW METAL PRICES HIGH METAL PRICES

and HIGH TC/RC and HIGH TC/RC Mines’ gross profit Mines close / Smelters open / Metal concentrates A* B reduce production increase production

Deductions for treatment and ) ­refining charges and impurities – (C + D + E) METALS AVAILABILITY METALS AVAILABILITY Smelters’ gross profit Treatment and refining charges

LOW METAL PRICES concentrates HIGH METAL PRICES and impurities C + D + E and LOW TC/RC ( and LOW TC/RC Free metals (F–B) *A Smelters close / Mines open / Extraction of by-products G reduce production increase production RAW MATERIALS AVAILABILITY Value of metal premiums F* H

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 15 STRATEGY | Market position Market position

Boliden is one of the world’s biggest zinc mining and smelting companies and is Europe’s leading copper and nickel company. Boliden also enjoys world-leading positions in the recycling of elec- tronic materials and of lead from batteries. Boliden’s position and expertise generate healthy preconditions for achieving our goal of being one of the best companies in the metals industry.

Boliden is the world’s fifth largest zinc mining company and the production. Aitik has a high productivity level and also earns sixth largest zinc smelting company. Tara and Garpenberg are large income from gold and silver. The Kylylahti mine is a small mine zinc mines by international standards, while the Boliden Area is a with high grades. The Rönnskär copper smelter is not only a smaller zinc producer. The Swedish mines, Garpenberg and the major copper producer, but a world-leader in the field of elec­ Boliden Area, also have income from several other metals, such as tronic recycling. The Harjavalta smelter is a small operator when silver, gold, lead and copper, while Tara in Ireland has limited reve­ it comes to copper, but has the biggest nickel smelting capacity nues from by-product metals. The Kokkola zinc smelter is a major in western Europe. zinc producer, while the Odda zinc smelter is a smaller plant. Boliden is the eleventh biggest lead mining company in the Boliden is smaller mining operator when it comes to copper, world, but is a medium-sized lead smelting company in terms but is a significant producer of copper metal in Europe. The Aitik of primary lead. Boliden does, however, enjoy a prominent mine is a large copper mine, but low grades limit copper metal ­position in the European secondary lead market.

The ten biggest zinc mining operators The ten biggest zinc smelting operators

Metal production 2014, Ktonnes Metal production 2014, Ktonnes Glencore Korea Zinc Group Hindustan Zinc Nyrstar Teck Glencore MMG Limited Hindustan Zinc Boliden Votorantim Votorantim Boliden Nyrstar Shaanxi Nonferrous Metals Minera Volcan China Minmetals Corp Industrias Penoles Teck Sumitomo Yuguang Gold and Lead Co 0 200 400 600 800 1,000 1,200 1,400 0 200 400 600 800 1,000 1,200 1,400

Boliden is one of the world’s ten biggest zinc mining operators. Boliden is one of the world’s ten biggest zinc smelting operators.

Source: Wood Mackenzie, Dec. 2014 Source: Wood Mackenzie, Dec. 2014

The ten biggest copper mining operators The ten biggest copper smelting operators

Metal production 2014, Ktonnes Metal production 2014, Ktonnes Codelco Jiangxi Copper Comp. F-McM Copper & Gold Codelco BHP Billiton Aurubis Glencore Tongling Southern Copper (ex SPCC) JX Holdings Rio Tinto Glencore Glencore Xstrata AG Sumitomo Metal Mining Anglo American plc KGHM Polska Miedz KGHM Polska Miedz F-McM Copper & Gold Antofagasta plc Southern Copper (ex SPCC) 0 500 1,000 1,500 2,000 2,500 0 200 400 600 800 1,000 1,200 1,400 1,600

Boliden, with a production of approximately 80 Ktonnes, is Europe’s Boliden, with a production of approximately 350 Ktonnes is Europe’s third largest copper producer. Globally, Boliden is a smaller operator. third biggest player. Globally, Boliden is a smaller copper smelting operator.­ Source: Wood Mackenzie, Dec. 2014 Source: Wood Mackenzie, Dec. 2014

16 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT STRATEGY | Competitiveness Competitiveness

The prices of Boliden’s metals are set on the global market and competitive costs are, therefore, critical to the company’s long-term success. Cash cost is a commonly used metric in the mining industry that enables comparisons of the world’s mines. Smelters can also be compared by means of a metric known as cash margin.

Mines’ competitiveness is best shown by comparisons of what from by-product metals, or low productivity, while competitive is known as their cash cost. A mine’s cash cost comprises operat­ mines often have substantial income from by-product metals ing costs, treatment and refining charges, less revenues from by- and a good operating cost level. Smelters’ competitiveness product metals. The LME price minus a mine’s cash cost gives depends on their cost level, their capacity to extract several met­ a good idea of the mine’s gross profit at different metal prices. als from raw materials, to handle complex raw materials, and on Mines with weak competitiveness often have little or no income strong customer relationships.

Cash cost in the mining industry Cash margins for smelters The graphs below show global cash cost curves for zinc and copper The graphs below show global cash margin curves for zinc and cop- mines, with Boliden’s mines highlighted. The curves are based on per smelters, with Boliden’s smelters highlighted. The curves are the estimates and assumptions of the research company, Wood Mac- based on the estimates and assumptions of the analysis company, kenzie. Boliden’s own cash cost per mine data may differ from those Wood Mackenzie. See page 113 for a description of the cash mar- of Wood Mackenzie due to differences in the basic input data. See gin concept. page 113 for a description of the cash cost concept.

Zinc – cash cost C1 composite costing Zinc – cash margin for smelters US Cents/lb US Cents/lb 200 80

160 60

120 40

Tara 80 The Boliden Area 20 Kokkola Odda Garpenberg 40 0

0 Mackenzie Jan. 2015 Source: Wood -20 Mackenzie Jan. 2015 Source: Wood 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of the industry’s production of zinc metal in concentrate Percentage of the industry’s production of zinc metal

Wood Mackenzie’s global cash cost compilation is used to compare Wood Mackenzie’s global summary is used to compare smelters’ mines’ cost position. The cash costs at Garpenberg, Tara and in the margins. Based on this summary, Kokkola and Odda have Boliden Area are, based on this compilation, 48, 78 and 76 USc/lb. cash margins of USc 12/lb of metal and USc 10/lb of metal, of metal, respectively. Garpenberg and the Boliden Area’s figures are, respectively. in accordance with Wood Mackenzie’s definitions, calculated using pro rata costing, while Tara’s are calculated using normal costing.

Copper – cash cost C1 composite costing Copper – cash margin for smelters

US Cents/lb US Cents/lb 400 50

40 300 30

The Boliden Area 20 Rönnskär Harjavalta 200 Kylylahti Aitik 10

0 100 -10 Source: Wood Mackenzie Jan. 2015 Source: Wood 0 -20 Mackenzie Jan. 2015 Source: Wood 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of the industry’s production of copper metal in concentrate Percentage of the industry’s production of copper metal

Wood Mackenzie’s summary indicates that Aitik, Kylylahti and the Boliden According to Wood Mackenzie’s summary, Harjavalta and Area have cash costs of 145, 190, and 221 USc/lb, respectively. The cal- Rönnskär have cash margins of USc 13/lb of metal and culations for Aitik and Kylylahti are performed in accordance with normal USc 17/lb of metal, respectively. costing, while those for the Boliden Area are performed in accordance with pro rata costing. Kylylahti’s cash cost is based on Boliden’s own estimates.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 17 STRATEGY | Strategic orientation Strategic orientation

Efficient and stable processes, financial strength and respect for people and the environment are the cornerstones of Boliden’s long-term profitability and growth. Boliden’s expertise within mines and smelters is central to the value creation, both in the day-to-day operations and in new projects.

Mission Strategy

Boliden produces metals that make modern life work. Metals Boliden strives to be in a leading position among medium-sized are vital to society’s development. Boliden produces base and metals companies by creating competitive mines and smelters precious metals through exploration, mining operations, smelt­ and by being the natural choice for business partners. The pri­ ing operations, and recycling. No effort is spared, throughout mary focus for Boliden’s mining operations is the creation of Boliden’s value chain, to live up to society’s demands for safety, growth through increased exploration and investments in environmental consideration, and good ethical conduct. organic growth, coupled with improved productivity. For the smelters, meanwhile, the focus is on increasing profitability by reducing costs, improving process stability, and improving the Vision ability to process complex raw materials. Boliden’s strategy can be summarised in terms of the Boliden shall be a world class metals company. This means that following areas: Boliden shall be among the leading companies in the industry 1. Stable and resource-efficient operations. in terms of customer satisfaction, efficiency and responsibility. 2. Elimination of production bottlenecks. Boliden operates in a raw materials market in which the trade 3. Expansion investments in in-house projects. in metal concentrates and finished metals is global, while the 4. Acquisitions of producing mines and mine projects. customer base is regional. High levels of productivity and cost- effective production are critical to success in this volatile sector.

Stable and resource-efficient operations Who we are The New Boliden Way (NBW) constitutes the Group’s overall methodology for developing productivity, stability and quality. NBW describes how Boliden will develop into a world class metals company, respected for its ability to generate added value for its customers, shareholders and other stakeholders. Continuous Improvements NBW is integrated into the day-to-day operations in order to ensure high standards and a level of competitiveness that stands No Waste Low Cost Right Quality up well to international comparison in every aspect of the oper­ ations. The aim of NBW is to implement value creation, as well Standardise Common Culture Right from the Start as attitudes and actions that will promote a spirit of continuous improvement in every aspect of our operations, supported by Passion for Improvements the unwavering commitment of every single Boliden employee. Performance Personal Commitment Leadership Stability and sustainability are the cornerstones of NBW and Management the basis of Boliden’s development. Boliden’s values – passion Value Chain Responsibility

for improvements, personal commitment and value chain Stability Sustainability responsibility – are shared by everyone within the company and act as guidelines for our development as a company. Recurring processes shall be based on standards and act as the cornerstones Ultimately, NBW is all about Boliden’s future competitive for continuous improvements. The improvement work is advantages and has helped Boliden make extensive improve­ driven both by personal leadership and good example. ments and advances in efficiency in the past few years.

18 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT STRATEGY | Strategic orientation

Elimination of production increased investment in exploration. mine projects, utilised its financial and bottlenecks The augmented capacity at Garpenberg personnel resources to invest in organic Increased stability and productivity at and the new silver extraction facility at growth because the investment calcula­ existing plants boost growth by enabling Kokkola have both come on line in 2014. tions have proved more favourable. higher volumes to be produced without Decisions have also been taken to The Kylylahti mine in eastern Finland the need for major investments. The increase ore production at Aitik to 45 and exploration rights in the Outokumpu elimination of production bottlenecks Mtonnes per annum and zinc production and Kuhmo fields were acquired in can free up spare capacity throughout the at the Odda smelter to 200 Ktonnes 2014. The areas offer good geological value chain and normally leads to high per annum. potential and Boliden adjudges its capac­ levels of value generation. Examples may ity for increasing the value of the assets include increased automation that results Acquisition of producing mines by exploiting our expertise to be good. in improved machine availability, or and mine projects Boliden is a significant smelting com­ minor investments in technology that Boliden is constantly evaluating potential pany in Finland and is now, as a result reduce the time spent on servicing and acquisition opportunities. This involves of the acquisition, a mining company maintenance and reduce the risk of un- both operational mines and new mine there as well. expected production stoppages. projects. Any potential acquisition must enable Boliden to generate additional Expansion investments in value through its knowledge and expertise in-house projects within the sphere of exploration, mining Boliden has, in addition to its work on operations, concentration techniques enhancing efficiency, been investing sub­ and metallurgy. Boliden has participated stantial resources in various growth pro­ in numerous acquisition discussions jects for a number of years now. These over the years but previously the acquisi­ investments have taken the form both tion prices have been too high to meet of numerous expansion investments in Boliden’s yield requirements and the com­ existing mines and facilities and of pany has, rather than acquiring mines or

1 Leadership 28 Continuous Improvement 5 2 Customer/Supplier Relations How we do it 27 Process Stability 3 NBW Plan Deployment (A3) The spider diagram illustrates the ele­ 26 Team Management 4 4 Performance Management ments that make up a complete imple­ mentation of NBW. It is also a tool for 5 Elimination of Waste 25 Shipping 3 measuring the operations’ current level in the overall implementation process. 24 Quality 2 6 Problem Solving The implementation of improvements is broken down into 28 areas that allow 23 Autonomation 1 7 Learning and Competence Dev. each unit to choose those components that make the biggest contribution to 0 22 Visual Control 8 Skill Development improvements by the unit in question.

21 Inventory 9 Standards for Work

20 Conveyance 10 Help Chains and Support Functions

19 Changeover 11 Production System

18 Pace/Takt Time 12 5S

17 Levelling 13 Operation Availability

16 Balancing 14 Maintenance Operations 15 Flow

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 19 STRATEGY | Goals and goal fulfilment Goals and goal fulfilment

Boliden’s overall goal is to focus on profitability throughout its operations in order to ­generate value for its shareholders while, at the same time, acting responsibly in relation to both people and the environment.

Boliden operates in a cyclic and capital-intensive industry in ­stability are prerequisites of sustainable growth and long-term which long-term value creation is achieved through improve­ value creation. Boliden communicates and follows up on both ments in productivity, strict cost control and investments financial and sustainability goals. in profitable new production. Stable processes and financial

Financial goals

Returns Net debt/equity ratio

SEK m % SEK m % 40,000 24 The return on capital 10,000 50 The net debt/equity ratio employed totalled 8 per 8,000 40 at the end of 2014 was 30,000 18 cent (5%). The average 35 per cent (38%). The 6,000 30 20,000 12 per annum return during year on year fall was the period from 2010 to 4,000 20 due to improved profits 10,000 6 2014 was 12 per cent. 2,000 10 and lower working capital tied up. 0 0 0 0 10 11 12 13 14 10 11 12 13 14

Capital employed Return on capital employed Net debt Net debt/equity ratio

The investments Boliden makes shall generate a high return The net debt/equity ratio in an economic upturn shall be no and shall be made in line with Boliden’s strategy and avail­ higher than 20 per cent. The aim is to maintain a reasonable able resources. The projects’ internal interest rates shall be financial ability to act in a recession. higher than Boliden’s weighted average cost of capital (WACC), adjusted for a risk surcharge. The WACC before tax is currently nominally set at 12 per cent, which corre­ sponds to 10 per cent in real terms. Calculations for major Dividend and long-term projects are normally conducted in real terms. SEK % 5 50 They are based on forecast interest rates, metal prices, The proposed dividend is 4 40 SEK 2.25 (SEK 1.75) exchange rates, inflation and other relevant assumptions per share, correspond- 3 30 drawn from internal analyses and external assessments. ing to 32.4 per cent 2 20 (37.0%) of the profit for 1 10 the year. 0 0 10 11 12 13 14

Dividend Dividend share

Boliden’s dividend policy states that the dividend shall corre­ spond to approximately one third of the net profit. The divi­ dend share during the period from 2010 to 2014 totals 33.9 per cent of the aggregate net profit for the period.

20 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT STRATEGY | Goals and goal fulfilment

Sustainability goals – Social

Zero accidents resulting in absence from work A sick leave rate that does not exceed (LTI)1) every month at all units 3.0 per cent by 2018

LTI frequency % 10 The number of accidents which resulted in 5 The sick leave rate rose in 2014 for 8 absence from work (LTI) fell in 2014 from 4 the second year in succession reach- 6 8.9 to 7.9 per one million hours worked. 3 ing 4.3 per cent (3.9%). Boliden is reviewing its rehabilitation work and 4 2 is examining the possibility of finding LTI frequency including contractors 2 1 alternative types of work. 0 LTI frequency for Boliden’s own personnel 0 10 11 12 13 14 10 11 12 13 14 Sick leave rate

Female employees shall comprise at least 20 per cent of the workforce by 2018

% 20 At the end of 2014, 852, or 17.5 15 per cent, of Boliden’s workforce were women, corresponding to an 1) 10 increase of 0.3 percentage points The accident frequency is reported, starting in 2012, for Boliden’s own personnel including contractors. The accident frequency is measured since 2013. 5 as the number of accidents/one million hours worked. An accident is defined as an accident that occurs at work and which results in absence 0 Percentage of female employees from work on the following day or for a longer period of time. 10 11 12 13 14

Sustainability goals – Environmental

Discharges of metals2,3) to water shall be Carbon dioxide intensity shall be stabilised at ≤ 0.77 reduced by 25 per cent by 2018 tonnes of CO2 per tonne of metal produced by 2018 Tonnes Tonnes/tonne 30 1.0 Discharges of metals to water The carbon dioxide intensity 25 have decreased by 4 per cent 0.8 has decreased to 0.74 from 20 since 2012. 0.6 0.77 (2012). 15 0.4 10 5 0.2 0 Discharges of metals to water 0.0 Carbon dioxide intensity 10 11 12 13 14 10 11 12 13 14

Emissions of metals4) to air shall be reduced Zero environmental accidents per month by 10 per cent by 2018

Tonnes Number/month 25 Emissions of metals to air have increased 1.2 The number of environmental accidents 20 by 12 per cent since 2012. The emissions 1.0 has risen since 2013. Boliden has experi- 0.8 15 of metals to air have been higher than the enced nine incidents when limit values internal goals for the year. This has been 0.6 were exceeded, six of which involved inter- 10 due to recurring problems with dust treat- 0.4 nal waste deposits, where the impact on 5 ment filters at Boliden’s smelters. 0.2 the external environment was minimal. 0 0.0 10 11 12 13 14 Emissions of metals to air 10 11 12 13 14 Environmental accidents per month

Emissions of sulphur dioxide3) to air shall be reduced by 10 per cent by 2018

Tonnes Boliden has formulated a number of environmental goals for 2018, 10,000 using 2012 as the base year. Additional comments on the results Emissions of sulphur dioxide are provided in the section Sustainable development on pages 54–62. 8,000 to air have decreased by 2) 6,000 11 per cent since 2012. Copper, zinc, lead, nickel, cadmium and mercury. From 2012, analyses also include arsenic and antimony. 4,000 3) New measuring points have been added since 2012. 2,000 4) Copper, zinc, lead, nickel, cadmium and arsenic. 0 Emissions of sulphur dioxide to air From 2012, analyses also include mercury. 10 11 12 13 14

BOLIDEN ANNUAL REPORT 2014 21 Operations

Boliden’s operations are conducted in two Business Areas, Mines and Smelters, in Sweden, Finland, Ireland and Norway. The metals and by-products produced by Boliden are mainly sold to industrial customers in Europe.

Contents This is Boliden – from deposit to customer 24 This is exploration 26 How mines work 28 How smelters work 29 How to interpret Boliden’s figures 30 The Group 31 Mines 34 Smelters 40 Purchasing goods and services 46 Risk management 47 Gerd Martinsson, a driller at the Aitik copper used. A large percentage is also copper mine (left), holds her hand on used in the construction, engineering the detonator button, ready to set off and process industries. The automotive over a hundred tonnes of explosives. industry mainly uses copper in the manu- Every blasting round requires approx- facture of radiators and electronics. imately 150 holes to be drilled and Copper is also a very important recyc- ­loaded with around a tonne of explosives ling metal. Almost 90 per cent of all each. In 2014, Boliden’s mines extrac- available copper scrap is recycled, ted ore containing a total of 78,000 not least mobile phones which contain tonnes of copper. 2 grams of copper. The Rönnskär Electricity and electronics – fundamental ­copper smelter is the world-leader in to today’s modern societies – are based the field of electronic recycling. In addi- on copper’s excellent electrical conduc­ tion to copper, the smelter recovers tivity, and account for nearly half of the gold, silver and zinc. OPERATIONS | This is Boliden – from deposit to customer This is Boliden – from deposit to customer Boliden’s value chain stretches from exploration to the sale of pure metals. Acting responsibly in relation to people, the environment and society is a central element in every link of the chain.

Mines

Prerequisites Access to land (in 2014: 21,900 hectares), infrastructure, facilities, machinery, equipment.

Other energy Chemicals Other energy Chemicals 0.5 TWh 80 Ktonnes 0.9 TWh 52 Ktonnes Electricity (1,900 TJ) Water Internal and Electricity (3,400 TJ) Water Explosives 1.3 TWh 22 million m³ external Secondary 2.7 TWh 151 million m³ 32 Ktonnes (4,600 TJ) concentrates raw materials (9,900 TJ) 2,335 Ktonnes 304 Ktonnes

Exploration Mining Concentration Raw materials feed and recycling Metal production Sales

Metal grade: zinc 3–7%, copper O.2–1.6% Metal grade: zinc 55%, copper 25% Metal grade: zinc 55%, copper 25% Metal grade: zinc 99.995%, copper 99.9975% Mineral Ore Concentrates reserves Metals Sulphuric acid 46 Mtonnes 961 Ktonnes 1,200 Mtonnes Noise, 884 Ktonnes 1,659 Ktonnes Waste rock Noise, diffuse Tailings 44 Mtonnes diffuse dust 40 Mtonnes dust emissions emissions By-products 197 Ktonnes

Waste Emissions to air Discharges Waste Emissions to air Discharges Non-hazardous, Carbon dioxide, to water Those affected: Non-hazardous, Nitrogen dioxide, to water 258 Ktonnes 664 Ktonnes Metals, 19 tonnes Regulatory authorities, 11 Ktonnes 150 tonnes Metals, 9.4 tonnes Hazardous, 788 Ktonnes Sulphur dioxide,7 Ktonnes Nitrogen, 51 tonnes municipalities, landowners, Hazardous, Carbon dioxide, Nitrogen, 173 tonnes Metals, 22 tonnes local residents, reindeer herding, 3 Ktonnes 337 Ktonnes the tourist industry, flora and fauna, outdoor activities.

Exploration Mining and concentration Boliden’s mining operations play a key role Meeting the demand for metals and Our in-house expertise in mine design, in local development by providing employ- securing Boliden’s long-term growth mining technology, and extraction methods ment opportunities, increased purchasing requires extractable ore reserves, today coupled with a high degree of technology power and a basis for societal services. and tomorrow. Exploration – the search development, means that several of At the same time, mining operations for mineral deposits – is conducted both Boliden’s mines have achieved world impact the environment by bringing about in the vicinity of existing mines and in new class productivity. Boliden extracts ores changes in the landscape, causing emis- areas. Boliden’s exploration focuses on from open-pit mines as well as under- sions and discharges of metals to air and deposits that contain zinc, copper and ground mines. water as well as generating noise and precious metals. Maintaining a good dia- The ores extracted are transported to dust. To Boliden, the safety of the com­ logue and close cooperation with local concentrators in the respective mining pany’s personnel and of others who are residents, land owners and other stake- area, where they are processed into affected to varying degrees of its opera- holders is of great importance, not least metal concentrates. The majority of zinc tions is always a top priority. Boliden has in order to ensure a good basis for the and copper concentrates are further adopted a zero tolerance vision for work- subsequent opening of a mine. refined into metals at Boliden’s smelters. place and environmental accidents and A certain volume of concentrates is sold strives for a continuous reduction of the to external customers. operations’ environmental impact.

24 BOLIDEN ANNUAL REPORT 2014 OPERATIONS | This is Boliden – from deposit to customer

Smelters

Prerequisites Access to land (in 2014: 21,900 hectares), infrastructure, facilities, machinery, equipment.

Other energy Chemicals Other energy Chemicals 0.5 TWh 80 Ktonnes 0.9 TWh 52 Ktonnes Electricity (1,900 TJ) Water Internal and Electricity (3,400 TJ) Water Explosives 1.3 TWh 22 million m³ external Secondary 2.7 TWh 151 million m³ 32 Ktonnes (4,600 TJ) concentrates raw materials (9,900 TJ) 2,335 Ktonnes 304 Ktonnes

Exploration Mining Concentration Raw materials feed and recycling Metal production Sales

Metal grade: zinc 3–7%, copper O.2–1.6% Metal grade: zinc 55%, copper 25% Metal grade: zinc 55%, copper 25% Metal grade: zinc 99.995%, copper 99.9975% Mineral Ore Concentrates reserves Metals Sulphuric acid 46 Mtonnes 961 Ktonnes 1,200 Mtonnes Noise, 884 Ktonnes 1,659 Ktonnes Waste rock Noise, diffuse Tailings 44 Mtonnes diffuse dust 40 Mtonnes dust emissions emissions By-products 197 Ktonnes

Waste Emissions to air Discharges Waste Emissions to air Discharges Non-hazardous, Carbon dioxide, to water Those affected: Non-hazardous, Nitrogen dioxide, to water 258 Ktonnes 664 Ktonnes Metals, 19 tonnes Regulatory authorities, 11 Ktonnes 150 tonnes Metals, 9.4 tonnes Hazardous, 788 Ktonnes Sulphur dioxide,7 Ktonnes Nitrogen, 51 tonnes municipalities, landowners, Hazardous, Carbon dioxide, Nitrogen, 173 tonnes Metals, 22 tonnes local residents, reindeer herding, 3 Ktonnes 337 Ktonnes the tourist industry, flora and fauna, outdoor activities.

Raw materials feed, recycling and safety culture is a top priority. The goal Sales metal production is to have zero workplace and environ- The majority of Boliden’s metals and Boliden’s five smelters possess a high mental accidents and a continuous other products are sold to industrial degree of process-technological exper- reduction of the operations’ environ­ customers in Europe. Zinc is supplied to tise, flexible smelting processes and an mental impact. steel companies, amongst others, while ability to produce high-quality metals The smelters produce zinc ingots, copper is supplied to manufacturers from complex mined concentrates and copper cathodes, lead ingots and gold of wire rod, copper rods and copper secondary raw materials. and silver granules, along with a num- alloys. The automotive and construction The smelters are supplied with con- ber of by-products such as sulphuric industries are important end-consumers centrates from the Group’s own mines acid, zinc clinker, aluminium fluoride, of base metals. Many of Boliden’s by- and with concentrates and secondary liquid sulphur dioxide, palladium concen- products are sold as raw materials to raw materials from external suppliers. trate, and small quantities of a number other industries. Handling large material flows, high of other metals. ­temperatures and substances that, if handled wrongly, can be hazardous to health means that work on creating a safe work environment and a strong

BOLIDEN ANNUAL REPORT 2014 25 OPERATIONS | This is exploration This is exploration

Exploration is the prerequisite of long-term mining operations and growth. Boliden has cutting-edge expertise in exploration and is a European industry-leader in this field.

Boliden’s exploration areas Boliden’s exploration is primarily conducted in existing mining areas – what is known as mine-site exploration – and focuses on ores that contain zinc, copper and ­precious metals. Boliden also conducts field exploration in order to identify deposits in new areas in Sweden, ­Finland and Ireland.

2

4 3

Ireland 6 1. Tara – Zn, Pb

Sweden 2. Aitik and Norrbotten – Cu, Au, Mo 5 Salmijärvi, Liikavaara, Laver 3. The Skellefte field – Zn, Cu, Pb, Au Kristineberg, Maurliden, Maurliden Östra, Renström, Kankberg 4. Along the western mountain range – Zn, Pb 5. Garpenberg and Bergslagen – Zn, Pb 1 Finland 6. The Outokumpu field and Kuhmo – Cu, Zn, Ag, Au, Ni

Boliden’s exploration where successful exploration work resulted in the identification Exploration involves identifying, prioritising and investigating of completely new ore bodies, resulting in substantial increases areas in order to locate mineral deposits. Mineral reserves and in mineral resources and mineral reserves that enabled Garpen- mineral resources are the basis of a mining company’s opera- berg’s expansion and extended the mine’s lifespan. tions. Successful exploration means that mineral reserves and The scale of field exploration has increased over the years and resources increase at a higher rate than mined production and involves securing the company’s long-term survival with the thereby generate the conditions for long-term growth. Boliden help of completely new ore deposits. Extensive exploration in focuses primarily on identifying ores that contain zinc, copper the Boliden Area has indicated new mineralisations at greater and precious metals, such as gold and silver. depths and in the vicinity of the ores currently being mined. Exploration can be divided into field exploration, which A new international exploration department was also set up in involves searching new areas, and mine-site exploration in the 2014. Boliden carries out field exploration in Sweden, Ireland vicinity of already operational mines and the acquisition of and Finland using its own resources, and via partnerships in exploration projects from other companies. Finland and on Greenland. Boliden’s strategy in recent years has been to prioritise mine- Exploration is associated with uncertainties and risk, not least site exploration, principally because it has been very successful, due to the time factor. Between five and ten years may often pass but also because the lead time from deposit identification to pro- between the initial investigations and a decision being taken to duction is shorter and the geological conditions are favourable. open a mine. Mine-site exploration is being conducted in all of Boliden’s mining 121,770 m of test drilling was carried out in 2014. The cost of areas, including the newly-acquired Finnish mine, Kylylahti. the exploration activities totalled SEK 279 million (SEK 298 m). Exploration successes have gradually lengthened the lifespan For more information on Boliden’s mineral reserves and of the majority of Boliden’s mining areas, such as Garpenberg, ­mineral resources, see pages 109–112.

26 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | This is exploration

Mine geologists at Boliden’s newly acquired copper mine, Kylylahti, examine results of recent test drillings. Boliden also acquired ­copper/nickel deposits in the Outokumpu field in eastern Finland in conjunction with its purchase of Kylylahti.

From exploration to mine

Geological potential 1–15 years Mineral resources1) 2–10 years Mineral reserves 2) 1–5 years

Generating Evaluation of Testing of Delimitation Concept Preliminary Pre-project Decision on project ideas target areas target areas of mineral study study starting a mine resources

10,000 1,000 50 5 1

Number of test areas

1) Mineral resources are those parts of an indicated deposit that may be commer- cially extractable but which do not qualify for classification as a mineral reserve due to insufficient knowledge. 2) Mineral reserves are those parts of an indicated deposit that can be reliably mined and processed in accordance with the company’s profitability requirements.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 27 OPERATIONS | How mines work How mines work

Boliden has both open-pit mines and underground mines. The geometry and composition of the ore body determine how it is mined and which concentration processes are used. The ore is ground to a fine sand in the concentrator and metal-bearing elements are then separated out from waste rock using a variety of different concentration methods. These are followed by dewatering and filtration, and the concentrates are then shipped to the smelters.

Open-pit mine 8 6 2 7 5 1. Waste rock mining: 6. Concentrator waste rock is stripped in 7. Tailings pond: the tailings order to get at the ore sand is deposited in tail- 1 2. Waste rock dump ings ponds that are 3. Ore extraction, blasting, ­surrounded by dams loading and transporta- 8. Clarification pond for tion to crushers cleaning and recircula- 4. Rock crusher tion of water to the 3 ­concentrator 4 5. Conveyor belt for crushed ore

Underground mine

9

8

10 1. Ramp system for access 6. Rock crusher for crushing to mine stopes and trans- ore before it is transported ports to the concentrator 1 2. Portal, or access ramp, 7. Skip station where to reach the ore body crushed ore is loaded 3. Mine stope onto lifts or “skips” 5 3 4. Ore body 8. Shaft for transporting ore and personnel 5. Industrial area and 2 workshops 9. Concentrator 10. Mined out and backfilled section

6 4

7

Concentration

Crushed ore: Primary and secondary Flotation: the sand is carried to tanks Dewatering and Metal concentrate: the end crushed ore mills: mills grind the where chemicals are added and air is filtering:­ the mineral result is zinc concentrate that from the mine. crushed ore. The milling injected from underneath, causing differ- froth is gathered up, contains approx. 50 per cent is carried out in two ent types of mineral to rise to the sur- dewatered and fil- zinc, or copper concentrate stages to produce sand face, forming a froth. Non-mineral-bear- tered to produce a that contains approx. 25 per with a grain size of 0–250 ing particles (tailings sand) deposit on the dry concentrate. cent copper. The metal con- micrometres. bottom of the tank and are transported centrates are sent to the to tailings ponds. smelters.

28 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | How smelters work How smelters work

Boliden’s smelters refine mined concentrates and secondary materials into pure metals. The metals are separated out with the aid of high temperature reactions or by means of leaching.

Zinc smelters The zinc process comprises five main stages including roasting, leaching, purifica- tion and electrowinning, before the finished zinc is smelted and cast into ingots. Zinc smelters are extremely energy-intensive.

Metal concentrate Roasting Leaching Purification Electrowinning Casting Metal concentrate The concentrate is The calcine is leached The zinc sulphate solu- The zinc is precipitated The zinc is then cast from mines usually roasted in a furnace in with sulphuric acid in tion is purified in three out of the solution by to form zinc ingots comprises approxi- order to remove the order to precipitate stages to remove any means of electrowin- and sold as pure mately 50 per cent sulphur. The result is out and filter off the copper, cobalt, nickel ning. The result is zinc zinc or alloyed to zinc. what is known as cal- iron content. The and cadmium, after cathodes with a zinc form zinc alloys in cine, which comprises result is a zinc sul- which it contains content of 99.995 per line with specific approximately 60 per phate solution with approximately 150 cent. customer require- cent zinc. The so-called small amounts of grams of zinc per litre ments. direct leaching method impurities. of solution. enables the roasting stage to be eliminated.

Copper smelters Copper smelters use a range of different processes specially designed to Sulphuric acid plant Precious metals plant ­handle different types of copper concentrate. One common denominator Process gases, primar- Gold, silver, palladium and for all of these processes is that high temperature operations such as ily sulphur dioxide, are platinum are extracted smelting and converting­ make up a large part of the refining process. ducted away to the sul- from the processes and phur products plant for account for a significant the production of sul- percentage of the copper phuric acid and other smelters’ revenues. sulphur products.

Metal concentrate Smelting Converting Anode furnace and Electrolytic refining Metal concentrate The smelting takes The copper matte is tapped into a casting plant The anodes are placed in from mines usually place in different types converter where iron and other The blister copper is tanks with steel cathode comprises approxi- of furnaces, depending impurities, together with sulphur, further processed in plates. In the subsequent mately 25 per cent on the raw material and are separated out. The converter an anode furnace to electrolytic refining process, copper. the process technology. is also charged with metal scrap reduce the oxygen the copper is transferred An upper layer of slag and, where appropriate, black cop- ­content. This increases from the anodes to the and a lower one of per, which is an intermediate prod- the purity level to ­cathodes, which achieve a ­copper matte, which uct in the recycling of electronic 98–99 per cent and copper content of 99.9975 has a copper content materials. The result after convert- the copper is then cast per cent. The cathodes are of approximately ing is known as blister copper, and to form anodes. stripped from the steel plates 55 per cent, form in contains 97–98 per cent copper. and washed, after which they the furnace. are ready for delivery.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 29 How to interpret Boliden’s figures Boliden’s results are reported under two Business Areas, namely Mines and Smelters. Transactions between the ­Business Areas are settled at market price. This presentation provides a brief summary of Boliden’s accounts and profit ­performance at Group and Business Area level.

MINES The Group, SEK m 2014 2013 1 Revenues are affected by metal prices, exchange rates, TC/RC and concentrate quality as well as any strategic metal Revenues 36,891 34,409 price and exchange rate hedging. Operating profit excl. revaluation 2014 Revenues increased by 12 per cent as a result of higher of process inventory 2,605 2,271 volumes and a stronger US dollar. Operating profit 2,759 1,803 2 The operating profit is affected not only by the parameters above, but also by production volumes, metal grades, the metal recovery during the concentration process, and the operating costs. Business Area Mines, SEK m 2014 2013 2014 The operating profit fell by 19 per cent. The decrease was due to lower metal prices and higher TC/RC terms, increased 1 Revenues 9,318 8,303 costs and depreciation. This was in part offset by positive 2 Operating profit 1,299 1,598 exchange rate effects as a result of a stronger US dollar and increased production.

SMELTERS Business Area Smelters, SEK m 2014 2013 3 Revenues are affected by metal prices and metal premiums, which are paid over and above the LME prices. The smelters’ 3 Revenues 35,894 33,410 sales of a number of by-products are also an important part of 4 Gross profit excl. revaluation the revenues. of process inventory 7,869 6,908 2014 Revenues increased by 7 per cent as a result of a stronger Operating profit excl. revaluation US dollar, higher zinc prices and higher copper sales volumes. 5 of process inventory 1,518 679 4 The gross profit is the difference between what the smel- 5 Operating profit 1,672 210 ters pay for the raw materials and the sales revenues and com- prises metal premiums, TC/RC and income from free metals and by-products, as well as any strategic metal price and exchange rate hedging. 2014 The gross profit excluding smelters’ process inventories increased by 14 per cent as a result of improved TC/RC levels and 6 Other and Eliminations, SEK m 2014 2013 metal premiums and positive exchange rate trends. Revenues –8,321 –7,305 5 The operating profit comprises the gross profit minus the Operating profit, internal profit operating costs. The most important cost items for the smelters ­eliminations – 65 110 are those in connection with energy, personnel and external ser­ vices, which are largely affected by maintenance of the facilities. Operating profit, other –147 –115 The operating profit is shown both including and excluding the revaluation of the smelters’ process inventories. Excluding the effect of process inventory revaluation provides a better picture of the underlying trend. 2014 The operating profit excluding revaluation of process ­invent­ories increased by 124 per cent as a consequence of higher gross profit and lower costs in local currencies, which in turn are primarily the result of cost-cutting measures at Rönnskär.

6 OTHER and ELIMINATIONS Includes Group staff functions and Group-wide functions, differen- ces in certain accounting principles between the Business Areas and the Group, and the elimination of profits on intra-Group sales. See page 66 for complete Income Statements. OPERATIONS | The Group The Group

Revenues and operating profit Operating profit 2014 2013 The new facilities at Garpenberg and Kokkola were brought on Revenues, SEK m 36,891 34,409 line and production ramped up in 2014. Increased production Operating costs before depreciation, SEK m 10,933 10,304 stability was still in focus and an action programme designed to Depreciation, SEK m 3,277 2,829 improve the process balance at Rönnskär and to cut the plant’s Operating profit, excl. revaluation of costs was implemented. The Kylylahti copper mine and explo- ­process inventory, SEK m 2,605 2,271 ration rights in eastern Finland were acquired during the year. Operating profit, SEK m 2,759 1,803 Boliden’s revenues totalled SEK 36,891 million (SEK Profit analysis, SEK m 2014 2013 34,409 m). The increase was due to a stronger US dollar, higher Operating profit 2,759 1,803 zinc prices and higher copper sales volumes. Revaluation of process inventory 154 –469 The operating profit totalled SEK 2,759 million (SEK Operating profit excl. revaluation 1,803 m), and the operating profit excluding revaluation of pro- of process inventory 2,605 2,271 cess inventory was SEK 2,605 million (SEK 2,271 m). Change 333

The operating profit for Mines totalled SEK 1,299 million Analysis of change (SEK 1,598 m), while for Smelters, the operating profit exclud- Volume effect 532 ing revaluation of process inventory was SEK 1,518 million Prices and terms 892 (SEK 679 m). Metal prices and terms –23 The operating profit was positively affected by higher volumes By-products, prices and terms –28 in both Business Areas. The volume effect from Mines of SEK Realised metal price and 495 million was primarily due to the expansion of Garpenberg, currency hedging* –181 TC/RC terms 153 higher grades and milled ore tonnage in the Boliden Area and the Metal premiums 144 acquisition of Kylylahti. The volume effect for Smelters was SEK Exchange rate effects 827 37 million. Odda’s production levels were high and stable, with Costs (local currencies) –294 all of the plant’s leaching tanks operational during the latter half Depreciation (local currencies) –412 of the year. Maintenance shutdowns at Smelters impacted the Internal profits –175 operating profit to the tune of SEK –205 million (SEK –330 m). Items affecting comparability –171 Lower average prices for all metals with the exception of zinc Other –37 had a collective negative effect on the profit of SEK –23 million, Change 333 while improved TC/RC terms and metal premiums had a positive effect on the profit of SEK 153 million and SEK 144 million, *Operating profit for respective period 2014 2013 respectively. The US dollar strengthened against the Swedish Realised metal price and currency hedging 47 227 krona, and this, coupled with other exchange rate fluctuations, affected the profit to the tune of SEK 827 million.

Revenues and operating profit Breakdown of operating costs Earnings per share and dividend share SEK m SEK m SEK % 60,000 6,000 20 40

50,000 5,000 15 30 40,000 4,000

30,000 3,000 10 20

20,000 2,000 5 10 10,000 1,000 Personnel, 25 (24) % 0 0 Energy, 17 (18) % 0 0 10 11 12 13 14 Consumables & spare parts, 18 (19) % 10 11 12 13 14 Transport, 4 (4) % Revenues Operating profit Earnings per share Dividend share External services, 18 (20) % Operating profit excl. revalu­ Depreciation & other, 17 (15) % ation of process inventory

The operating profit excluding revaluation of Operating costs including depreciation Earnings per share totalled SEK 6.94 ­process inventory increased, primarily as a increased in local currencies by approx­ (SEK 4.72) and a dividend of SEK 2.25 is result of a stronger US dollar and higher produc- imately 7 per cent. proposed, corresponding to a dividend tion levels, mainly within Business Area Mines. share of 32.4 per cent.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 31 OPERATIONS | The Group

The Group’s operating expenses, excluding depreciation, totalled as of 1st October. Apart from Kylylahti, the biggest investments SEK 10,933 million (SEK 10,304 m), corresponding in local were the expansion project at Garpenberg and the facility for currencies to an increase of 4 per cent. Adjusted for the positive extracting silver from zinc concentrate at Kokkola. non-recurring effect totalling SEK 171 million at Tara in 2013, Investments, SEK m 2014 2013 and for Kylylahti, costs increased by 2 per cent in local curren- Investments in Mines 3,450 3,763 cies. The action programme at Rönnskär resulted in a total Investments in Smelters 768 1,200 improvement in the profit of approximately SEK 150 million, Investments, Other 4 12 with lower costs and an improved process balance accounting for Total investments 4,222 4,974 approximately SEK 100 million and approximately SEK 50 mil- lion of this total, respectively. By 2017, the programme is expected to yield a total improvement in the profit of SEK 275 Increased future reclamation costs million per annum in comparison with 2013. The expansion of the Aitik mine to 45 Mtonnes of ore per annum Depreciation increased, primarily due to the new facility at and the associated extension of the mine’s lifespan to 2040 lead to Garpenberg being brought on line and to higher levels of depre- increased future reclamation costs. The reclamation reserve and ciation at Aitik. the fixed assets have been raised by SEK 358 million, largely as a The difference in the adjustment of the internal profit totalled result of the expansion decision. The amount has no effect on the SEK –175 million and was primarily attributable to higher zinc profit or cash flow for 2014 and is not included in Boliden’s stock volumes. ­definitions of investments. As the mine’s lifespan also increases to Items affecting comparability comprise non-recurring items 2040 annual depreciation is only marginally affected. attributable to Tara in 2013. There were no items affecting com- parability in 2014. Cash flow The net financial items for the year totalled SEK –288 million The cash flow from operating activities before changes in work- (SEK –222 m) and the profit after financial items was SEK ing capital totalled SEK 5,301 million (SEK 4,052 m) in 2014. 2,471 million (SEK 1,581 m). Interest capitalisation for the Tax paid for the year totalled SEK 242 million (SEK 303 m). expansion project at Garpenberg ceased, which had a negative The reduction in working capital increased the cash flow by effect on reported interest expenses. SEK 488 million (SEK –546 m). The reported tax for the year totalled SEK –572 million (SEK The free cash flow totalled SEK 1,583 million (SEK –288 m), corresponding to an average tax rate of 23 per cent. The –1,466 m). The improvement was due to a higher profit, lower net profit for the year totalled SEK 1,899 million (SEK 1,294 m), working capital tied up, and lower investment levels. corresponding to earnings per share of SEK 6.94 (SEK 4.72). Cash flow, SEK m 2014 2013 Cash flow from operating activities before Investments changes in working capital 5,301 4,052 Investments for the year totalled SEK 4,222 million (SEK Changes in working capital 488 –546 4,974 m). The Kylylahti copper mine and exploration rights Cash flow from operating activities 5,789 3,505 in Finland were acquired during the year. The operations Cash flow from investment activities – 4,206 – 4,971 acquired have been consolidated into Business Area Mines, Free cash flow (before financing) 1,583 –1,466

Investments and cash flow Free cash flow Cash flow from operating from operating activities activities and investments, respectively. Cash flow from SEK m SEK m operating activities before invest- 7,000 4,000 ments increased due to a higher profit and lower working capital­ 6,000 3,000 tied up. 5,000 2,000 Free cash flow. Free cash flow 4,000 1,000 increased by SEK 3,049 million. 3,000 0 2,000

1,000 -1,000

0 -2,000 10 11 12 13 14 10 11 12 13 14

Investments Cash flow from operating activities

32 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | The Group

Financial position Principles for remuneration to the President On 31st December 2014, Boliden’s net debt totalled SEK 8,283 and other senior executives million (SEK 8,673 m). Shareholders’ equity totalled SEK The remuneration paid by Boliden to senior executives shall 23,974 million (SEK 23,075 m), including net market valu­ comprise a fixed salary, variable remuneration, pension benefits ation of currency, interest and raw materials derivatives totalling and other benefits. Remuneration to senior executives is SEK 63 million (SEK 267 m) after fiscal effects. The positive described in Note 3 on pages 78−79. cash flow for the year resulted in a fall in the net debt/equity The variable remuneration component shall be linked to the ratio to 35 per cent (38%) by the end of 2014. Group’s profitability and the individual in question’s sphere of The average term of Boliden’s total granted loan facilities was responsibility and shall primarily comprise one or more finan- 3.4 years (2.6 yrs.) at the end of the year. The average interest cial parameters. The maximum variable remuneration shall be level in the debt portfolio on 31st December was 1.6 per cent 60 per cent of the fixed annual salary for the President and (1.8%) and the average fixed interest term was 0.8 years (0.7 40−50 per cent of the same for other senior executives. 10 per- yrs.). The interest term was extended on an ongoing basis centage points of this shall be conditional upon Boliden shares throughout the year with the aid of interest swaps. being purchased for the gross sum before tax. Senior executives At the end of the year, Boliden’s current liquidity totalled are, in common with all Boliden Group employees, also part of SEK 5,847 million (SEK 6,356 m), comprising liquid assets a profit-sharing system. Senior executives have a defined contri- and unutilised binding credit facilities with terms of over one bution pension solution and a retirement age of 65. The Board year. The change in current liquidity is due to refinancing does not intend to propose any changes to these guidelines to ­carried out in 2014 that resulted in lower credit facility levels. the Annual General Meeting to be held in May 2015. For further information on Boliden’s debt portfolio, see Note 26 on page 92.

Capital structure and return 2014 2013 Balance Sheet total, SEK m 43,865 41,841 Capital employed, SEK m 35,087 34,451 Shareholders’ equity, SEK m 23,974 23,075 Net debt, SEK m 8,283 8,673 Return on capital employed, % 8 5 Return on shareholders’ equity, % 8 6 Equity/assets ratio, % 55 55 Net debt/equity ratio, % 35 38

The Parent Company The Parent Company conducts limited operations on what is, for fiscal purposes, commission from Boliden Mineral AB and has no employees. The Income Statements, Balance Sheets and Statements of Cash Flow for the Parent Company are shown on page 70.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 33 Mines

Boliden Mines comprises nine mines in five mining areas: Aitik, the Boliden Area and Garpenberg in Sweden, Kylylahti in Finland and the Tara mine in Ireland. The Business Area also includes responsibility for exploration, technological development, the environment/reclamation, and sales of mined concentrates.

“2014 saw an increase in ­mining capacity following the start-up of the new facilities at Garpenberg and the acqui- sition of the Finnish mine, Kylylahti. Boliden Mines con­ tinues the work on improved productivity through invest- ments in automation and mine design.”

Jan Moström, President, Boliden Mines OPERATIONS | Mines

Revenues and operating profit Mines’ operating costs before depreciation increased by 10 per The majority of Mines’ sales are made to the Group’s smelters, cent to SEK 5,417 million (SEK 4,924 m), corresponding to an with a smaller percentage sold to external smelters. All sales are increase in local currencies of 9 per cent. Adjusted for the positive made on market terms. non-recurring effect at Tara in 2013, and for Kylylahti, costs Revenues increased by 12 per cent to SEK 9,318 million increased by 4 per cent in local currencies. The increase was prin- (SEK 8,303 m), of which external sales totalled SEK 920 million cipally due to higher volumes and to the new facility at Garpen- (SEK 834 m). Mines’ operating profit fell to SEK 1,299 million berg being brought on line. (SEK 1,598 m). Lower average prices for all metals with the Depreciation increased, year on year, to SEK 2,264 million exception of zinc, together with higher TC/RC terms, higher (SEK 1,917 m), corresponding to an increase of 18 per cent. The costs and an increase in depreciation, collectively had a negative increase was related to the depreciation of the new facility at effect on the operating profit. This negative effect was compens­ Garpenberg and to higher depreciation levels at Aitik. ated for, in part, by positive exchange rate effects from a stronger US dollar and higher production levels. Production The operating profit for both the Boliden Area and Garpen- The milled ore tonnage increased at all Swedish mines. Metal pro- berg increased, as a result of higher production levels of metal duction also increased with the exception of copper production. in concentrates. Aitik’s operating profit fell due to lower metal The milled ore tonnage at Aitik increased by 5 per cent to prices and copper grades, and an increase in depreciation. 39 Mtonnes. Lower grades and recovery rates did, however, Excluding items affecting comparability, Tara’s operating profit result in a fall in copper production. Gold and silver production increased due to higher metal prices, which compensated for increased. Plans for 2015 and 2016 are for production to con- lower production levels. Kylylahti, which was acquired during tinue in areas with slightly below-average grades for the mineral the year, was consolidated on 1st October. reserve. The production plan for the year predicts a milled ore tonnage of 40 Mtonnes.

Key data 2014 2013 Profit analysis, SEK m 2014 2013 Revenues, SEK m 9,318 8,303 Operating profit 1,299 1,598 Operating costs excl. depreciation, SEK m 5,417 4,924 Change –298 Depreciation, SEK m 2,264 1,917 Analysis of change Operating profit, SEK m 1,299 1,598 Volume effect 495 Investments, SEK m 3,450 3,763 Prices and terms 22 Capital employed, SEK m 19,615 18,288 Exchange rate effects 474 Return on capital employed, % 7 9 Costs (local currencies) –270 Average number of employees, FTE 2,559 2,459 Depreciation (local currencies) –326 Items affecting comparability –171 Other –47 Change –298 Operating profit for respective period Realised metal price and currency hedging 47 184

Revenues and operating profit Breakdown of revenue Breakdown of Revenues and operating by metal operating costs profit.The fall in operating profit in comparison with SEK m SEK m 2013 is due to lower metal 12,000 6,000 prices, higher TC/RC terms, higher costs and an 10,000 5,000 increase in depreciation.

8,000 4,000 Breakdown of revenue 6,000 3,000 by metal. The percentage of the revenues increased 4,000 2,000 for zinc, while it decreased for copper. 2,000 1,000 Copper, 36 (41)% Personnel, 26 (24)% 0 0 Zinc, 31 (26)% Energy, 12 (13)% Breakdown of operating 10 11 12 13 14 Silver, 13 (14)% Consumables & costs. Operating costs in Gold, 12 (12)% spare parts, 21 (21)% local currencies, excluding Revenues Operating profit Lead, 7 (6)% Transport, 3 (4)% depreciation, increased by Other, 1 (1)% External services, 19 (22)% 9 per cent. Depreciation & other, 19 (17)%

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 35 OPERATIONS | Mines

The milled ore tonnage in the Boliden Area was 1,862 Ktonnes, in zinc production. Lead production increased, however, due corresponding to a year on year increase of 3 per cent. The to a higher grade and recovery rate. increase was mainly due to the resetting of one of the ore lines for six weeks last year to concentrate slag from Rönnskär. Increases Investments in the milled ore tonnage and higher grades resulted in produc- Extensive investments have been made during the year in order tion increases for all metals with the exception of copper. Copper to boost both productivity and metal recovery and to thereby production fell due to a decline in the quantities mined at the improve the mines’ competitiveness and extend their lifespans. Maurliden Östra copper mine. The ore mix in the Boliden Area A total of SEK 3,450 million (SEK 3,763 m) was invested in will shift, in the longer term, towards an increased percentage of Boliden Mines, a substantial part of which continued to go to the zinc and gold ore, and a smaller percentage of copper ore. expansion at Garpenberg. An ongoing programme of investment Production began at the new Garpenberg facility in May, in technological development and enhanced efficiency is also which resulted in an increase in the milled ore tonnage of 49 per taking place at all of Boliden’s mines. The acquisition of the cent to 2,224 Ktonnes (1,495 Ktonnes). Zinc production and ­Finnish copper mine, Kylylahti – an acquisition which is expected silver production increased by 41 per cent and 35 per cent, to more than comply with the requirements of Boliden’s strategy respectively, due to a higher milled ore tonnage. The zinc recov- for growth – was consolidated into Boliden Mines on 1st Octo- ery level fell, year on year, but showed an improvement during ber. The investment totalled SEK 718 million. the year. The annual milled ore tonnage rate is expected to total 2.5 Mtonnes by the end of 2015. Garpenberg expansion enters final phase Kylylahti, which was acquired on 1st October 2014, made The expansion at Garpenberg entered its final phase in 2014. a positive contribution to copper production levels. Production began at the new concentrator in May, and the pro- The milled ore tonnage at Tara fell to 2,287 Ktonnes (2,493 ject as a whole was inaugurated in August. The investment is, Ktonnes) due to disruptions to production during the year in overall, Boliden’s second biggest ever, totalling SEK 3,900 mil- the form of, amongst others, a fire and a conveyor belt break- lion, and Garpenberg is now one of the world’s most modern down. These factors, coupled with a lower grade, resulted in a fall and efficient underground mines.

Copper production Zinc production Copper production. Copper ­production fell slightly in spite Ktonnes Ktonnes Ktonnes Ktonnes of higher milled tonnage. The 40,000 100 6,400 400 fall was due to a lower grade and recovery rate at Aitik, and changes in the ore mix in the 30,000 75 4,800 300 Boliden Area. The newly acquired mine, Kylylahti, made a positive 20,000 50 3,200 200 contribution to copper production.

Zinc production. Higher milled 10,000 25 1,600 100 ore tonnage, primarily at Garpen- berg, resulted in higher levels of 0 0 0 0 zinc production. 10 11 12 13 14 10 11 12 13 14

Milled ore Metal content Milled ore Metal content

Gold production Silver production Lead production Gold production. Gold produc- tion increased both in the Boliden Kg Kg Tonnes Area and at Garpenberg. A lower 5,000 400,000 80,000 grade at Aitik resulted in stable gold levels, the higher milled ton- 4,000 nage notwithstanding. 300,000 60,000

3,000 Silver production. The main 200,000 40,000 reason for the increase in silver 2,000 production is the higher milled tonnage at Garpenberg. 100,000 20,000 1,000 Lead production. Production 0 0 0 increased primarily due to higher 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 levels of milled tonnage at Garpenberg. Metal content Metal content Metal content

36 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | Mines

The investments in mining operations are in line with Boliden’s strategic orientation. In-house technological development is key to continued increases in the efficiency of the mining operations. A structure and a working model for project planning which enables efficient use to be made of resources, has been created within NBW and is now yielding clear results in the form both of organic growth and more efficient production. There are three main orientations to Boliden’s technological development work – metallurgy, which affects the concentrat- ing activities, mine automation, which 1:1750 relates to process control underground, 0 100 200 and environmental technology, which is designed to minimise the operations’ Mining is a long-term activity. This 3D image shows one possible plan for mining environmental­ impact. ­operations at the Garpenberg area’s Kvarnberget deposit, in the year 2025. The lime green, turquoise­ and lilac sections are those that can be profitably mined and which are hence classified as ore. Metallurgy for better recovery The development of new leaching tech- niques is the focus in metallurgy, and the ultimate objective is to be able to extract all Additional investments in Aitik of the metal present in the ore and convert In May, Boliden’s Board of Directors approved a decision to invest it into payable products. Examples of this kind of in-house SEK 600 million in an expansion of Aitik to an annual produc- developed process include the gold and tellurium extraction at tion rate of 45 Mtonnes. In October, the Land and Environment Kankberg, while another ongoing project involves impure cop- Court granted a permit for the increase in production at Aitik. per concentrates. Some of Boliden’s deposits produce copper This permit has been appealed to the Swedish Land and Environ- concentrate with high levels of antimony, which makes the con- ment Court of Appeal. For further information, see page 38. centrate less attractive. The ambition is to identify a method of Changes to the reclamation reserve will be implemented in con- leaching out the antimony in order to enable Boliden to deliver junction with the expansion, see Note 24 on page 91. a higher quality product to the smelters.

Exploration Increased automation Boliden conducts an ongoing and extensive programme of The technological development work being carried out with exploration work in both existing mining areas and elsewhere. the aim of increasing automation levels in the mines is helping The total cost of the company’s exploration activities in 2014 bring about continuous improvements in productivity and was approximately SEK 279 million (SEK 298 m). resulting in both better time utilisation and shorter lead times. An application for an exploitation concession for the copper The trend is towards autonomous machines where the processes deposit at Laver was submitted during the year. An exploitation are controlled by means of wireless data transfer from advanced concession entails, amongst other things, securing the exclusive control rooms and with the aid of smart mobile phones. Wire- rights to mine ore within the concession area for a period of less networks are successively being introduced in all of Boliden’s 25 years. Laver, which is similar in character to Aitik – large mines, enabling animated mine planning and follow-up work ­volumes with low grades of copper, gold and silver – is one of in real time. Boliden’s early phase development projects. For further information on Boliden’s exploration, mineral Environmental technology investments reserves and mineral resources, see pages 24 and 109−112. Boliden is on the cutting edge when it comes to investments in environmental technology, with a zero vision for the company’s Focus areas future environmental impact. A number of development pro- Environmental issues and accident prevention are top priority jects are being carried out internally, primarily in the fields of areas at Boliden’s mines. The accident rate has been falling for new water purification and reclamation techniques, and for the a number of years now, but the level is still too high. Work on handling of mine waste. strengthening the safety culture continues in the form of train- ing programmes and active leadership.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 37 OPERATIONS | Mines Five mining areas

Boliden’s mines mainly extract complex polymetallic ores that contain several different metals, and which consequently demand more of both the mining techniques and the concentration process. Zinc and copper are the most important metals, but the ores also contain gold, silver, lead and tellurium in payable quantities.

Boliden has developed and refined its expertise and technological development trates are sold to external customers. All mine design, mining techniques, extrac- are an important reason why several of of Boliden’s mining areas are reclaimed tion methods and concentration processes Boliden’s mines achieve such high pro- as the extraction work occurs and is com- over the years, with the help of, amongst ductivity and cost-effectiveness levels pleted when operations cease. other things, increased automation. This from an international standpoint. See page 28 for a description of how trend has been enabled by the company’s The majority of the zinc concentrates open-pit mines and underground mines investments in in-house expertise which and all of the copper concentrates are work. has, in turn, contributed to a high level of processed to produce metals at Boliden’s in-house technological development. This own smelters. Some of the metal concen-

Aitik World class productivity SEK 600 million in expanding the mine’s produc- Aitik in Norrbotten is Sweden’s biggest and tion to 45 Mtonnes per year. The investments the world’s most productive open-pit copper will focus on crushers, improved water pump- mine, which extracts copper, gold and silver. ing, new electrical substation for the electricity Large volumes and high levels of automation supply, and the elimination of bottlenecks. In ensure high levels of productivity. Favourable October, the Land and Environment Court waste rock conditions, combined with the granted a permit­ for expanded ore extraction by-product metals, gold and silver, ensure that and the necessary­ dam elevations. The ruling, in spite of the ore’s low copper grades, the which was implemented on 1st November, has mine’s cost position is healthy. been appealed and will be heard in the Swedish All of the copper concentrate produced at Land and Environment Court of Appeal in 2015. Aitik is delivered to the Rönnskär smelter. 2014 2013 Development in 2014 Revenues, SEK m 3,427 3,593 The extensive investments in Aitik have been Operating profit, SEK m 558 882 successful. Production in 2014 totalled 39 Investments, SEK m 1,181 1,143 Mtonnes of milled tonnage. Milled tonnage, Ktonnes 39,090 37,070 A decision was taken in May, as the first Av. no. of employees, FTE 679 675 stage in a development programme, to invest Accident frequency 12.0 7.8

The Boliden Area Five mines in a mineral-rich field Development in 2014 Boliden has mined ore in the mineral-rich Preparations for an increase in productivity at ­Skellefte field in Västerbotten at some 30 the Kankberg and Renström mines has con- mines since the 1920s. The area currently tinued in 2014. Kristineberg and the Boliden comprises the Renström, Kristineberg concentrator have, at the same time, been and Kankberg underground mines and the working with measures designed to enhance Maurliden and Maurliden Östra open-pit efficiency and boost productivity, such as mines. All of the mines in the area, with the metal recovery improvements and organisa- exception of Kankberg, produce complex tional changes. The milled tonnage in the ­polymetallic ores that contain zinc, copper, Boliden Area in 2014 totalled 1.9 Mtonnes. lead, gold and silver. The Kankberg mine, which re-opened in 2012, produces gold ore 2014 2013 with a high tellurium content. Revenues, SEK m 1,712 1,317 The mines supply ore to the concentrator at Operating profit, SEK m 188 19 Boliden, which is also home to leaching plants Investments, SEK m 261 364 for gold and tellurium production. The Boliden Milled tonnage, Ktonnes 1,862 1,809 Area’s customers comprise Boliden’s smelters, Av. no. of employees, FTE 533 519 European lead smelters (lead concentrate) and Asian tellurium customers. Accident frequency 8.6 16.5

38 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | Mines

Garpenberg World class productivity production at Garpenberg from 1.4 million The Garpenberg mine is located in central tonnes per year to 2.5 million tonnes annual Sweden. Mining of the deposits at Garpen- pace by the end of 2015 has been in pro- berg began back in the 13th century, making gress at Garpenberg since 2011. The start Garpenberg one of the world’s oldest mines of production, which was scheduled to take still operational. Garpenberg produces com- place at the end of the second quarter of plex polymetallic ores that contain zinc, silver 2014, was brought forward to the beginning and lead, along with small quantities of cop- of the quarter. The investment totalled, as per and gold. The mine’s productivity levels, planned, SEK 3.9 billion. The milled tonnage coupled with the relatively high silver grades, at Garpenberg in 2014 totalled 2.2 Mtonnes. have resulted in an advantageous cost posi- tion for the mine. Garpenberg’s productivity 2014 2013 levels are world class. Revenues, SEK m 2,318 1,675 The metal concentrates from Garpenberg Operating profit, SEK m 919 776 are delivered to Boliden’s smelters and to Investments, SEK m 916 2,045 European lead smelters (lead concentrate). Milled tonnage, Ktonnes 2,224 1,495 Av. no. of employees, FTE 404 376 Development in 2014 An expansion project that will increase ore Accident frequency 4.0 9.6

Kylylahti Boliden’s fifth mining area Kylylahti’s existing customers at the time of In 2014, Boliden acquired the Finnish cop- acquisition already included Boliden’s Harja­ per mine, Kylylahti, which is located in the valta and Kokkola smelters. The mine’s cur- Outokumpu area. The acquisition was con­ rent mineral reserves mean that the mine’s solidated as the Boliden Group’s fifth mining lifespan extends to 2021. area as of the fourth quarter of 2014. The mine, which opened in 2012, produces Q4 2014 ­copper, gold, zinc and silver. Revenues, SEK m 117 The geological conditions are similar to Operating profit, SEK m 7 those in the Boliden Area, which offers syn- Investments, SEK m 754 ergies in the fields of exploration, mining and Milled tonnage, Ktonnes 172 metallurgy. The acquisition also included Av. no. of employees, FTE 109 exploration rights in the Outokumpu field, which stretches north west for 30 km from Accident frequency 10.1 the town of Outokumpu and which has been home to several mines. Boliden believes that considerable potential exists for a number of other deposits in the area.

Tara Europe’s largest zinc mine Development in 2014 The Tara mine in Ireland is Europe’s biggest Tara’s production during the year was affected zinc mine and the ninth largest zinc mine in by unplanned production stoppages due, in the world, and produces not only zinc, but part, to a fire, and in part to the breakdown also lead concentrate. Mining operations of a conveyor belt. The milled tonnage in began in 1977 and the mine was acquired by 2014 totalled 2.3 Mtonnes. A new collective Boliden in early 2004. bargaining agreement was reached in the Tara’s relative cost position is high, due to autumn and will result in a 5 per cent cut in high personnel and energy costs and to the the workforce. The implementation of the absence of by-product metals with any sub- new organisation began in the autumn. stantial value. Tara has focused, in recent years, on improving its cost position through 2014 2013 measures designed to boost productivity and Revenues, SEK m 1,743 1,542 cut costs. Operating profit, SEK m 56 195 The metal concentrate from Tara is deliv- Investments, SEK m 313 201 ered to Boliden’s own smelters (zinc) and to Milled tonnage, Ktonnes 2,287 2,493 European lead smelters (lead concentrate). Av. no. of employees, FTE 607 667 Accident frequency 6.3 10.0

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 39 Smelters

Boliden Smelters comprises the Kokkola and Odda zinc smelters, the Rönnskär and Harjavalta copper smelters, and the Bergsöe lead smelter. The Business Area also includes purchases and refining of mined concentrates and recycled raw materials, and sales of metals and by-products.

“Production of all metals increased in 2014 and the Harjavalta and Odda smelters both set new production records. The focus for Boliden Smelters is to increase pro- cess efficiency and flexibility with regard to the handling of different raw materials.”

Kerstin Konradsson, President, Boliden Smelters OPERATIONS | Smelters

Revenues and operating profit ­process balance accounted for approximately SEK 50 million. Revenues totalled SEK 35,894 million (SEK 33,410 m) and the Overall, the programme is expected to yield a per annum gross profit, excluding the revaluation of process inventory, was improvement in the profit of SEK 275 million on the base year SEK 7,869 million (SEK 6,908 m). The increase in the gross of 2013, starting in 2017. The action programme also resulted profit was due to improved TC/RC and metal premiums, and to in a reduction in metals held in intermediate stocks, which had a positive exchange rate trend. Limited availability of secondary a positive effect on the cash flow for the year. For further infor- materials had a negative effect on the copper smelters. mation on the action programme, see page 44. The operating profit, excluding the revaluation of process The operating profit, excluding the revaluation of process inventory, increased to SEK 1,518 million (SEK 679 m). If the inventory, increased year on year at all of the smelters, with the process inventory revaluation effect of SEK 154 million (SEK exception of Harjavalta. The profit improvement at Rönnskär –469 m) is included in the calculations, the operating profit was was the result of better terms and lower costs. The amount of SEK 1,672 million (SEK 210 m). The operating profit was free metals at Harjavalta fell back to normal levels during the affected to the tune of SEK –205 million (SEK –330 m) by year after being unusually high in 2013. Higher prices and maintenance shutdowns, which resulted in both reduced rev­ improved terms account for most of the profit improvement enues and higher operating costs. The action programme at at both Kokkola and Odda. Lower costs also helped improve Rönnskär generated a total improvement in the profit of approx­ Kokkola’s operating profit and higher production levels contri­ imately SEK 150 million, of which lower costs accounted for buted at Odda. Stable production resulted in an improvement approximately SEK 100 million and improvements in the in Bergsöe’s profits.

Key data 2014 2013 Operating profit analysis, SEK m 2014 2013 Revenues, SEK m 35,894 33,410 Operating profit 1,672 210 Gross profit, excl. revaluation of process Revaluation of process inventory 154 –469 inventory, SEK m 7,869 6,908 Operating profit, excl. revaluation Operating costs, excl. depreciation, SEK m 5,370 5,346 of process inventory 1,518 679 Depreciation, SEK m 1,012 913 Change 839 Operating profit, excl. revaluation Analysis of change of process inventory, SEK m 1,518 679 Volume effect 37 Operating profit, SEK m 1,672 210 Prices and terms 796 Investments, SEK m 768 1,200 Exchange rate effects 353 Capital employed, SEK m 15,592 15,791 Costs (local currencies) 90 Return on capital employed, % 11 1 Depreciation (local currencies) –85 Number of employees, FTE 2,194 2,232 Other 2 Change 839 Operating profit for respective period Realised metal price and currency hedging – 43

Revenues and operating profit Breakdown of gross Breakdown of Revenues and operating excl. revaluation of process profit excl. revaluation operating costs profit. The improvement in profit year on year was due inventories of process inventories to improved TC/RC levels and metal premiums as well SEK m SEK m 40,000 2,000 as a positive exchange rate trend. Lower costs in local currencies also contributed. 30,000 1,500 Breakdown of gross profit. Treatment charges’ share 20,000 1,000 of the gross profit increased slightly, year on year. 10,000 500 Breakdown of operating TC/RC, 40 (39)% Energy, 24 (23)% costs. Operating costs 0 0 Free metals, 36 (36)% Personnel, 23 (23)% in local currencies, exclud- 10 11 12 13 14 Metal premiums, 13 (12)% External services, 16 (17)% ing depreciation, fell by By-products, 11 (13)% Consumables & spare parts, 2 per cent. Revenues Operating profit, excl. Other, 0 (0)% 15 (16)% revaluation of process Transport, 5 (5)% inventory Depreciation & other, 17 (16)%

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 41 OPERATIONS | Smelters

Smelters’ operating costs, excluding depreciation, totalled SEK (109 Ktonnes) due to a change in raw materials planning 5,370 million (SEK 5,346 m). Costs decreased in local curren- with the aim of improving process stability and to intermittent cies by 2 per cent due, primarily, to the action programme at materials shortages. Rönnskär’s processes, which were less stable Rönnskär. Kokkola’s operating costs also fell due to a tank last year, were gradually stabilised as a result of the smelter’s breakdown which resulted in a fall in production but which also action programme. meant a reduction in the consumption of energy and consum­ Harjavalta’s copper production levels remained stable with ables. The cost of energy rose at Odda due to exchange rate fluc- high levels of raw material feed and record-high copper produc- tuations and the loss of sales of surplus electricity. Harjavalta’s tion. High levels of impurities in the nickel concentrate resulted, costs increased due to, amongst other, higher prices for oxygen. however, in lower nickel concentrate feeds. Free metal levels A small number of unplanned stoppages resulted in higher costs returned to normal after being unusually high in 2013. for Bergsöe. Kokkola’s production was negatively affected by a breakdown in one of the hot leaching tanks at the end of July which resulted Production in the entire hot leaching process being shut down for two Smelters’ production of copper, zinc and precious metals months. This led to a fall in feeds and lower levels of zinc pro- increased, while levels of lead and lead alloy production duction. The effect on the profit of the downturn in production remained relatively stable. The year’s maintenance shutdowns and the repairs in relation to the tank breakdown totalled SEK were less comprehensive than last year and proceeded according 50 million. The newly opened silver extraction facility is sup- to plan. plied with materials from the hot leaching process and was, Rönnskär’s metal production levels rose. A doubling of the therefore, out of production for most of the third quarter. The silver capacity of the lead line resulted in higher levels of facility was restarted in November. silver production. Copper and lead concentrate feeds both Production levels at Odda were high and stable, with full increased. Electronic material feeds decreased to 82 Ktonnes capacity utilisation from the end of the second quarter after the

Zinc production Copper production Zinc production. Concentrate feed and zinc production Ktonnes Ktonnes Ktonnes Ktonnes increased at Odda year on year, 1,000 500 1,500 500 but fell at Kokkola.

800 400 1,200 400 Copper production. Both con- centrate feed and copper pro- 600 300 900 300 duction rose at Rönnskär and Harjavalta alike. The secondary 400 200 600 200 material feed decreased, how- ever, at both Rönnskär and 200 100 300 100 ­Harjavalta.

0 0 0 0 10 11 12 13 14 10 11 12 13 14

Concentrate Metal Concentrate Metal feed ­production feed ­production

1) Gold production Silver production Lead production Gold production. Gold produc- tion increased in comparison Kg Kg Tonnes with last year at both Rönnskär 20,000 800,000 50,000 and Harjavalta. 700 000 40,000 15,000 600,000 Silver production. Silver pro- duction rose at both Rönnskär 500 000 30,000 and Harjavalta. 10,000 400,000 20,000 300 000 Lead production. Rönnskär’s 5,000 200,000 lead production and Bergsöe’s 10,000 100 000 production of lead alloys were ­relatively stable during the year. 0 0 0 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14

Metal production Metal production Lead production

1) Silver concentrate at Kokkola is included in Lead alloys the production figures shown, as of 2014.

42 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | Smelters

replacement of a leaching tank that broke down in the fourth quarter of 2012. Odda’s zinc production increased by 15 per cent and reached a record high. Bergsöe’s production of lead alloys was stable throughout the year, unplanned stoppages notwithstanding.

Investments Smelters’ investments during the year totalled SEK 768 million (SEK 1,200 m). The investment in silver extraction at Kokkola was completed by the end of the year. Some production did take place in 2014 but the ramping up process was behind schedule. Smelters is making ongoing investments in the modernisation and upgrading of much of its process equipment. The prim­ary example of which during the year was the upgrading of the nickel electric furnace at Harjavalta, which will enable a longer period of production between maintenance shutdowns. Inno­ vation is one of Boliden’s most important tools for growth and enhanced efficiency. In-house technological development is ­taking place in a number of spheres and Boliden is continuing In 2014, Boliden responded to the favourable zinc market climate to work to improve its levels of expertise. by deciding to invest in additional efficiency-enhancing measures at the Odda smelter. The measures will boost the smelter’s per annum capacity to 200,000 tonnes of zinc by the latter half of 2017. Odda expansion Odda has, with the aid of a comprehensive action programme, successfully cut its costs and improved its process stability in recent years, thereby boosting its competitiveness. Boliden is Improve productivity now, in response to the favourable market climate for zinc, in- The work on improving productivity is intended to result vesting in additional efficiency-related improvements in order to in increased stability, higher recovery rates and lower costs. expand the plant’s capacity from its current level of 170 Ktonnes ­Efficient maintenance work, lengthening the periods of time per annum to 200 Ktonnes, and thereby further enhance its between stoppages, and faster stoppages are all examples of competitiveness. Odda expects to achieve this new capacity in ways in which productivity can be improved. the latter half of 2017 and the investment is expected to total NOK 350 million. Increased flexibility Increased flexibility is designed to strengthen the smelters’ Environmental investments at Rönnskär ­ability to handle impurities in materials and to improve the long- In 2014, the Swedish Land and Environment Court of Appeal term handling of residual products and waste. Boliden is well granted a new environmental permit for Rönnskär. The terms equipped to handle complex materials that contain impurities, of the permit will require a number of investments that have which is a significant advantage in today’s market. The ability already been incorporated into Boliden’s plans and will entail to handle waste in an environmentally safe and cost-effective total investments of around SEK 1 billion during the period way is also becoming increasingly important. The action pro- from 2015 to 2018, with the biggest single item being the gramme that has been drawn up and is now being implemented ­construction of a deep underground rock storage facility for at Rönnskär is specifically designed to handle these types of mercury-bearing material. changes in the raw material and new, more flexible requirements with regard to waste management. See also page 44, Smelters Focus areas − Rönnskär. Smelters’ efforts to enhance efficiency and promote growth are based on a sustainable and responsible approach to safety, health Maximise production of metals and by-products and the environment. Boliden has a zero tolerance vision with Maximising the production of metals and by-products enables regard both to work-related injuries and environmental damage. a broader product portfolio and diversification in certain key Boliden’s business partners shall, in common with the Group, areas. Examples of this kind of expansion of the product port­ operate a structured sustainability work and shall practice good folio include Harjavalta’s development of its business model for business ethics. nickel and Kokkola’s new silver extraction facility. See also pages Smelters conducts a programme of improvement work based 44−45, Smelters. on these approaches, within three focus areas: improving opera- tional efficiency, increasing flexibility, and maximising the recovery of metals and by-products.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 43 OPERATIONS | Smelters Five smelters

Boliden’s smelters enjoy strong market positions, thanks to their high level of process technology expertise, flexible smelting processes and the ability to produce high quality metals from complex mined concentrates and recycled raw materials. Boliden is the world’s biggest operator in the electronic recycling sector.

30 per cent of the copper concentrate used ide. The new silver extraction facility at The Bergsöe lead smelter produces lead by Boliden’s smelters comes from the Kokkola came on line during the year. alloys from recycled automotive batteries. Group’s own mines, with the remaining The copper smelters mainly produce The technological development focuses coming from external concentrate suppliers copper, gold and silver, but Rönnskär also on boosting competitiveness, primarily by and in the form of recycled raw materials produces lead and Harjavalta also pro- means of increased flexibility and maxim- from external suppliers. The corresponding duces nickel matte. The copper smelters’ ised production of metals and by-products. figure for the zinc smelters’ supply of zinc processes also produce a number of by- The majority of the smelters’ produc- concentrate is approximately 65 per cent. products, such as sulphuric acid, sulphur tion is sold directly to industrial customers The zinc smelters primarily produce dioxide, zinc clinker, selenium, copper sul- such as wire manufacturers, steelworks zinc metal, zinc alloys and sulphuric acid, phate, nickel sulphate, copper telluride, and battery manufacturers, primarily in but Odda also produces aluminium fluor­ and palladium and platinum concentrate. northern Europe.

Rönnskär World leader in electronic scrap recycling the year. Silver extraction­ capacity in the lead The main products of the copper smelter in line has been doubled,­ and an improved optimi- Skellefteå are copper, gold, silver and lead, sation system for raw materials increases the along with by-products such as sulphuric acid potential for attractive­ deals in the raw materi- and zinc clinker. The smelter processes copper als market. The Swedish Land and Environment concentrate from Boliden and external concen- Court of Appeal­ issued a ruling, approving a trate suppliers. The plant’s recycling capacity is new environmental permit. The permit is con­ the highest in the world at 120 Ktonnes ditional upon investments­ and investigations per annum. that are already included in the plans for the years ahead. Development in 2014 An action programme was initiated to improve 2014 2013 the stability of the production process and cut Revenues, SEK m 2,417 2,029 costs. Savings on contractors and consum­ Operating profit, SEK m 405 53 ables purchases were made. Negotiations on Investments, SEK m 147 345 reductions in staffing levels have been held. Copper production, Ktonnes 217 206 The improvement­ in the profit in comparison Av. no. of employees, FTE 829 866 with the base year of 2013 is expected to total SEK 275 million by 2017. The production Accident frequency 8.8 6.9 processes have become more efficient during

Harjavalta Copper and precious metals New business model for nickel Boliden Harjavalta is located near to the shores A new business model for nickel approved of the Baltic Sea in south western Finland. Harja­ in 2014 will come into force from mid-year valta refines copper and nickel concentrate and 2015. Boliden is launching a free-standing its main products are copper, nickel matte, ­business model for nickel smelting operations gold and silver, along with by-products such as in which nickel concentrate is bought in from sulphuric acid. The raw material consists of external suppliers and nickel matte is sold to ­copper concentrate from the Kylylahti mine and nickel refineries for further processing. external copper mines in South America, South The annual nickel matte production rate is East Asia, and southern Europe. estimated, as before, to total 25 Ktonnes.

Development in 2014 2014 2013 The volume of free metals returned to normal Revenues, SEK m 1,746 1,631 levels in 2014 after a few years with unusually Operating profit, SEK m 279 316 high volumes. The volumes in 2013 were the Investments, SEK m 225 246 result of earlier processing of intermediate­ Copper production, Ktonnes 130 119 stockpiles. Harjavalta’s nickel furnace was Av. no. of employees, FTE 399 391 upgraded and modernised as part of a planned maintenance shutdown. Accident frequency 5.7 10.7

44 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | Smelters

Odda Zinc for Europe’s steel industry Development in 2014 The Odda smelter on the south western Production levels during the year were high coast of Norway produces pure zinc and and stable. An action programme imple- zinc alloys, as well as aluminium fluoride and mented over the past few years has cut costs sulphuric acid. Approximately 55 per cent and improved Odda’s competitiveness. Scope of the smelter’s raw materials are supplied for further expansion has been generated and by Boliden’s mines with the remainder com- Boliden decided, in 2014, to invest NOK 350 ing from European mines etc. Zinc clinker million in increasing capacity to 200 Ktonnes. is supplied by Boliden’s Rönnskär copper This will strengthen Odda’s position and make smelter. The raw materials for the produc- maximum use of the zinc smelter’s capacity. tion of aluminium fluoride are fluorspar and aluminium hydrate. Odda uses the direct 2014 2013 leaching method and conventional roasting Revenues, SEK m 1,395 1,070 techniques. Operating profit, SEK m 209 –26 The majority of the zinc production is ex- Investments, SEK m 166 269 ported to the European steel industry. Alumini- Zinc production, Ktonnes 166 143 um fluoride is an additive used in the aluminium Av. no. of employees, FTE 282 295 industry and the majority of the production is sold within the Nordic region. Accident frequency 8.2 7.4

Kokkola Silver production boosts competitiveness Development in 2014 Kokkola in western Finland produces zinc and One of Kokkola’s six hot leaching tanks broke zinc alloys, sulphuric acid and, since 2014, down at the end of July and the entire hot ­silver in concentrate. Kokkola is the world’s leaching process was out of operation until eighth largest zinc smelter with a production early October, which postponed the bringing capacity of over 300 Ktonnes. The invest- on line of the new silver extraction production ment in silver production makes Kokkola facility, where production was ramped up more competitive, as the world’s zinc concen- during the fourth quarter. An installation trate is tending to have a higher and higher designed to increase the capacity of one of silver content. Kokkola’s two roasting lines was carried out The majority of Kokkola’s zinc concentrates during the second quarter. come from Boliden’s mines in Sweden and ­Ireland. Approximately 85 per cent of the zinc 2014 2013 production is exported, primarily to Europe. Revenues, SEK m 2,004 1,795 Kokkola uses both the in-house developed Operating profit, SEK m 459 248 direct leaching method and conventional Investments, SEK m 216 318 roasting techniques, and has consequently Zinc production, Ktonnes 302 312 a high flexibility in handling different raw Av. no. of employees, FTE 546 545 ­materials. Accident frequency 12.6 9.3

Bergsöe Contributing to an ecocycle for lead metal Boliden appealed a ruling issued by the Bergsöe, on the coast of southern Sweden, Swedish Land and Environment Court of is one of Europe’s biggest recycling facilities Appeal in 2013 but were refused permission for lead batteries. The main products are to take the appeal to the Supreme Court. lead and lead alloys and approximately 60 The ruling will have no effect on Bergsöe’s per cent of the lead production is sold to the operations in the short term, but will prevent battery industry in Europe, with the remain- a desired long-term expansion. der used for lead sheet and radiation Bergsöe has intensified its environmental shields, amongst other things. work during the year in order to reduce so- By recycling approximately 65 Ktonnes of called diffuse dust generation. lead scrap from the Nordic region and Europe – the equivalent of approximately four million 2014 2013 scrap car batteries – Bergsöe contributes to Revenues, SEK m 783 715 an ecocycle for lead metal. Operating profit, SEK m 45 39 Investments, SEK m 10 12 Development in 2014 Prod. of lead alloys, Ktonnes 44 45 Battery raw materials continued to be in Av. no. of employees, FTE 69 69 short supply, as was the case last year, and the price of raw materials increased. Accident frequency 0.0 7.0

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 45 OPERATIONS | Purchasing goods and services Purchasing goods and services The annual purchasing volume (excl. purchases of concentrates) totals approx. SEK 11.4 billion, with investments accounting for some SEK 2.3 billion of this total. Mines account for approx. 55 per cent of the total purchasing volume, with Smelters accounting for the remaining 45 per cent. Boliden ­currently has around 5,900 suppliers and 195 account for 80 per cent of the purchasing volume. The inflation of the Group’s purchasing prices during the year was effectively zero.

Prioritised areas Generate cost savings – increase procure- Boliden’s purchasing categories, Volume consolidation has yielded good ment efficiency. market and pricing trends results in 2014, coupled with the exploi­ Operational productivity and efficiency Boliden’s purchasing spend is divided tation of synergies in the respective – reduce internal lead times and improve into strategic categories which, depending ­Business Areas. The focus has also been delivery precision. on their nature, are handled at site level, on improvements to health, safety and Contract compliance – increase the percent- ­Business Area or Group level. the environment. Boliden will continue age of purchases linked to existing contracts. to work with the following prioritised This increases purchasing efficiency, cuts areas in the purchasing sphere: costs and reduces risks in relation to health, safety and the environment.

Category Description and market trend Boliden’s cost development Services The market trend for services purchased by Boliden follows inflation in the Consolidation of the number of suppliers has resulted in a certain country in question. The supplier market is in balance. amount of price reduction. The pricing trend is otherwise determined by inflation and price indices. Electricity Electricity prices in the Nordic region are driven by access to hydroelectri­ Boliden has worked to reassign and optimise existing contracts. city and nuclear power, electricity transmission capacity between the ­Market prices have fallen but have had a moderate impact on ­Nordic countries, Nordic electricity consumption, and taxes and charges. Boliden’s long-term electricity contracts. Bulk goods This wide-ranging category is driven by fluctuations in local markets, global There has been a market reduction in the price of petrochemical prod- and raw materials indices and currencies (EUR and USD). The market trend ucts and this has resulted in a certain amount of deflation overall within chemicals­ has been relatively stable. the category. The weakened Swedish krona has had a slight impact. Fixed The category has few suppliers, but substantial ones. 2014 was character- Boliden works to establish long-term relationships that focus on pro- installations­ ised by market balance, but also by a certain surplus in individual segments. ductivity and total cost with its suppliers. Some price reductions. Mobile Capacity surplus for certain types of machines. Boliden works to establish Measures to boost competitiveness and low-cost alternatives are equipment­ long-term relationships that focus on productivity and total cost with its part of the strategy. Slight reduction in prices within the category. suppliers. Logistics Satisfying competition. There is some excess capacity in south-bound Regional maritime freight initially experienced a price increase, but truck transports in Sweden, which benefits Boliden. Global maritime this has been compensated for by a fall in fuel prices at the end of the ­transports have a certain amount of overcapacity, driven by a decline year. Rail and road transport remained largely unchanged. in the shipping of raw materials for the steel industry. IT & Costs and service levels are affected by choice of technology, the ability The overall cost trend in 2014 has shown a definite fall due to global Telecoms to consolidate the IT landscape, and optimised specifications. price trends. Indirect The category primarily comprises services affected by salary trends Costs have largely remained unchanged due to consolidation of materials­ on a per country basis. Good market balance and competition. ­volumes, harmonisation of specifications, and securedcompetition. ­ and services Tools & Regional supplier base and good competition. Some reduction of prices in 2014. consumables­ Electrical Long-term supplier relationships with an installed base. The cost picture has remained unchanged. installations The market is in balance. & equipment

Purchasing volume per category Purchasing per currency

Services, 23% SEK, 53% Electricity, 16% EUR, 38% Bulk goods and Chemicals, 15% NOK, 6% IM&S, IT and Other, 10% USD, 2% Fixed equipment, 10% Other, 1% Logistics, 12% Mobile equipment, 8% Tools and Consumables, 4% Electrical installations and electrical equipment, 3%

46 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | Risk management Risk management

Boliden’s operations are cyclically sensitive and are exposed to fluctuations in metal prices and exchange rates. The operations have an impact on the surrounding environment and many processes are associated with work environment and safety risks. Boliden works unceasingly to reduce these risks, e.g. through scenario planning based on a range of ­different market fluctuations.

Operational risks

Operational risks are managed by the operating units in accordance with the guidelines and instructions adopted for each ­Business Area and unit.

Risk Description of risk Management and comments for the year

Health and Boliden handles large material flows, both below and Boliden has well-established health and safety routines, with a safety above ground. Employees and contractors are period­ clear zero tolerance vision. The number of accidents resulting ically exposed to heavy machinery and lifting, to high in lost time (LTI), including those suffered by contractors, fell, temperatures, and to substances that are hazardous year on year, and totalled 7.9 (8.9). Work on developing a to health. Deviations from established routines or in- clearer work environment strategy for the period from 2014 to adequate maintenance can give rise to dangerous situa- 2018 has been intensified during the year and one of the tions and the risk of personal injury. The risk of serious important focus areas has been the augmentation of routines accidents that can result in personal injury or fatalities relating to preventative health and safety work. must be respected and ongoing efforts to minimise it are vital. There is also a trend towards an increase in long-term sick leave that can result in a deterioration in the risk situation that can, in turn, result in an increase in ill health and accidents in future.

Environmental Climate impact – the outside world’s impact on Boliden Boliden works proactively with continuous monitoring and pro- impact Boliden is affected by the rising global temperatures. cess optimisation and with the potential for an increase in the Climate change in the form of increased precipitation capacity of Boliden’s water treatment processes. creates the risk of increased discharges of metals and nitrogen to water for Boliden and, hence, a greater risk that mandated environmental limits will be exceeded.

Carbon dioxide emissions – climate change Boliden’s goal is to ensure its carbon dioxide intensity, i.e. carbon Boliden’s operations result in the emission of green- dioxide emissions per tonne of metal produced, does not house gases, mainly carbon dioxide. It is difficult, in the increase. This goal will be achieved through a combination of effi- short term, to implement transformations that result cient energy usage and new, more efficient technology. Boliden in reduced emissions without simultaneously reducing has reduced its carbon dioxide intensity in 2013 and 2014 in production. comparison with the figures for the base year of 2012.

Carbon dioxide emissions – financial impact Boliden carries out regular analyses of future emissions costs Boliden’s smelters are subject to the EU’s Emissions and seeks, through its industry organisations, to promote trans- Trading Scheme, EU ETS. This can, potentially, result in parency and predictability in the Emissions Trading Scheme dur- increased costs. The mines are also indirectly affected ing not only the current trading period (2013–2020), but also for by higher costs as a result of the power sector raising subsequent periods. the price of electricity due to higher emissions costs.

Emissions and discharges of metals Efforts to manage the risk of emissions and discharges of metals Metal emissions and discharges to air and water are a are based on risk analyses. Ongoing monitoring and maintenance side-effect of the operations. The risk lies in the potential are carried out in line with the management systems’ instructions. for exceeding limit values or in emissions/discharges Boliden also invests in new technology, and efficiency enhancing that damage the environment. measures for its processes and operations. Continuous measure- ments, follow-up work and reporting are also carried out to ensure that Boliden achieves its emissions and discharges goals.

Dam safety Boliden works proactively to minimise its safety- and environment- Tailings ponds account for one of the largest scale risk related impact on its surroundings and works systematically with scenarios, both for Boliden and the mining industry in in-house monitoring and inspections. Every operating unit with its general. The risks comprise both the environmental own dam has a Dam Safety Manager and a Dam Operations impact of dam construction and the risk of a dam failure Manager. The dams are operated in accordance with the Gruv­ resulting in the discharge of contaminated water. RIDAS dam safety guidelines produced by the Swedish industry organisation for mining and metal companies, SveMin.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 47 OPERATIONS | Risk management

Risk Description of risk Management and comments for the year

Unplanned Boliden’s production essentially comprises continuous Boliden carries out preventative maintenance work at all of its pro- stoppages processes and unplanned stoppages can affect pro- duction facilities. Major maintenance shutdowns are carried out duction, emissions and discharges to air and water, every year within the smelting operations, while maintenance work and financial results. The stoppages can, in some is an integral part of the day-to-day operations for the mines. The cases, be long-term ones. Unplanned stoppages can, smelting and mines operations have been working with a range of for example, occur due to technical problems, acci- internal benchmark projects and knowledge exchange between dents or strikes. the production facilities for a number of years now, and Boliden has also adopted a zero tolerance vision for accidents in order to help prevent unplanned stoppages.

Talent pool A significant percentage of Boliden’s employees will Boliden has an established method of working with succession retire over the next few years. Stiff competition for planning for key positions and has also drawn up plans for skill skilled employees with some experience increases development and knowledge transfer. Talent Forums are held at the difficulty of replacement recruitment. all units to ensure that the right expertise is available in the right key positions at the right time. Boliden has an established pro- gramme of employer branding work and over the past year, the company has increased the number of visits it makes to universi- ties and trade fairs. Equal opportunities work has resulted in Boliden attracting considerable attention and this, in turn, has enabled us to demonstrate our talent pool work. One example of this is Women at Work – the network for women who are inter- ested in career development.

Market and commercial risks

Boliden’s market and commercial risks are primarily managed within the individual Business Areas and at Group level.

Risk Description of risk Management and comments for the year

Metal prices Changes to metal prices have a significant impact Boliden’s policy is not to hedge metal prices, but rather to allow on Boliden’s profits and cash flow. changes to be reflected in the result. There are some exceptions to this, e.g. when mining ore bodies with short residual lifespans or in order to ensure financial effectiveness in conjunction with major investment projects. See also under the “Financial risks” section. Boliden also continuously hedges Smelters’ metal price and currency exposure (with the exception of process inventory) in what is known as transaction exposure. See also under the “Financial risks” section.

Treatment Treatment and refining charges make up a large part The terms are negotiated annually by the major players in and refining of the smelters’ gross profit and are determined by the the mining and smelting industries. Boliden generally applies charges supply/demand in the metal concentrates market. these terms.

Customers Boliden has a reliance on a small number of large Boliden endeavours to reduce the risk by expanding the customer ­copper customers. Reduced sales to industrial portfolio through targeted sales activities. The number of indus- ­customers in Europe increase the risk of sales via trial customers in continental Europe has been expanded further the London Metal Exchange (LME), with slightly lower during the year and Boliden also has plans in place that would margins as a result. enable the production to be reorganised to produce LME-quality products in order to reduce its reliance on end-customers.

Raw materials A stable and reliable raw materials supply is important Boliden endeavours to conclude long-term agreements with supply in enabling the smelters to produce at high levels of ­reliable external metal concentrate and recycling materials capacity utilisation and consistent quality. Approximately ­suppliers. 70 per cent and 35 per cent, respectively, of the smelters’ copper and zinc requirements are met by external suppliers.

Energy prices Energy accounts for approximately 17 per cent of Boliden has long-term electricity contracts with slow-moving price operating costs and changes in energy prices can have clauses in Sweden and Norway. In Finland and Ireland, the con- a significant effect on profitability. tract portfolio is shorter term and Boliden is more exposed to market prices. As a consequence, changes in energy prices impact the operating profit. Boliden monitors opportunities to enter into longer term agreements if and when such opportunities arise. Boliden continues to participate in collaborative projects designed to ensure long-term competitive power generation.

48 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | Risk management

Financial risks

Boliden has a centralised treasury function that is responsible for managing financial risks with the exception of credit risks in accounts receivable. The treasury function is tasked with supporting the management and operating units at Parent Company and Group level. This structure ensures good internal risk monitoring and offers both financial and administrative economies of scale. The treasury function is responsible for identifying and efficiently limiting the Group’s financial risks in line with the financial policy adopted by the Board of Directors.

Risk Description of risk Management

Exchange rate The pricing terms for Boliden’s products are primarily The Group’s total sensitivity to the factors listed (see sensitivity and metal determined on raw materials exchanges such as the ­analysis table below) is calculated on the basis of the quarterly price risks London Metal Exchange (LME) for base metals and the reports detailing the Group companies’ planned exposure resulting London Bullion Market Association (LBMA) for precious from metal production, exchange rates and interest. The effects of metals, and the currency and money market. Boliden’s different market scenarios can be quantified on the basis of the products are largely priced in USD and fluctuations in information on sensitivity to market changes, and can then act as the USD/SEK/EUR exchange rates hence have a signi­ source data for the management of financial risks and be reported ficant impact on Boliden’s profits and cash flow. The to the Board of Directors, management, and the market. Group’s exchange rate and metal price exposure covers transaction exposure and translation exposure:

Transaction exposure: Transaction exposure in conjunction with binding undertakings is Boliden’s transaction exposure comprises both binding hedged with the exception of the smelters’ process inventory. Expo- undertakings and forecast cash flows. sure in conjunction with forecast cash flows is normally not hedged in line with Boliden’s policy. See also the “Market and commercial risks” section above.

Exposure in connection with binding undertakings Boliden’s policy stipulates that risks from exposure in conjunction This exposure arises when Boliden undertakes to par- with binding undertakings shall be hedged in full, with the exception ticipate in a transaction at a fixed value and which is of the smelters’ process inventory. See also the “Market and com- not compensated for by a simultaneous opposite trans­ mercial risks” section above. The Group uses futures contracts to action of a corresponding size and nature. The Group ensure that the sale price and exchange rate correspond to those buys metals in the form of raw materials which it pro- applicable in conjunction with the purchase of the raw material in cesses into refined metals, and where the acquisition question or with the signing of a sales agreement at a fixed price. value of the raw materials as well as the exchange Hedge accounting is applied to the futures contracts, thereby rates may differ from the final sales value. Such differ- hedging the fair value in the Income Statement. ences arise as a result of variations in size, purchasing date, processing and selling. Furthermore, some cus- tomers receive fixed prices in different currencies that are sometimes set well in advance of delivery.

Exposure in conjunction with forecast cash flows Boliden continuously calculates the way in which changes in metal This exposure arises due to the fact that a substantial and exchange rate markets will affect the Group’s future financial percentage of the Group’s future income – primarily position. See the sensitivity analysis of the operating profit table that relating to extracted metals and to treatment and below. Boliden’s policy is not to hedge metal prices and exchange refining charges – is affected by fluctuations in metal rates in relation to the Group’s future income under normal commer- prices and exchange rates. cial conditions. Boliden can, however, in order to limit the risk in cer- tain situations, hedge part of the forecast cash flows. There may be special justification in conjunction with major investments or invest- ments in mines with a short lifespan for limiting the financial risks. The Group can use futures and options contracts to hedge metal prices and/or exchange rates for the cash flows from forecast metal sales. The derivatives are hedge accounted as cash flow hedging under Other comprehensive income. See page 50 for a sensitivity analysis of how the Other comprehensive income result is affected by a change in the value of financial derivatives (cash flow hedging).

Sensitivity analysis – operating profit, excluding outstanding Sensitivity analysis – other comprehensive income, taking into derivatives account outstanding derivatives The table below contains an estimation of the effect on the operating The table below contains an estimation of the effect on the Other com- profit of changes in market terms for the following year. The effect is prehensive income (income and cost items including reclassification calculated on the basis of closing day prices on 31st December 2014 adjustments not reported under the profit), before tax, of changes in and is based on forecast metal sales. The sensitivity analysis does not the value of outstanding derivatives based on the closing day prices on take into account the effects of metal price and exchange rate hedging 31st December 2014. over and above the transaction hedging for binding undertakings, nor Changes in the value of financial derivatives in respect of binding does it take into account the effect of the smelter’ process inventory undertakings and translation exposure have a very limited or no effect revaluation. The analysis does not include assumptions regarding such on the profit or Other comprehensive income. The table below hence factors as cost inflation, discrepancies in production trends or macro­ contains the effect of changes in the value of derivatives intended to economic conditions. The starting point for calculating the effects of a counter the Group’s forecast exposure. 10 per cent change in metal prices is the so-called “cash price” on the LME or LBMA on 31st December 2014. The corresponding starting point for changes in the value of the US dollar is spot rates on the same date. The effect of changes to treatment and refining charges is based on changes in relation to the average level during the fourth quarter.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 49 OPERATIONS | Risk management

Risk Description of risk Management

Exchange rate Translation exposure The effect of translation exposure is eliminated with the help of external borrow- risk A translation difference arises when ing and currency futures contracts in accordance with Boliden’s financial policy. converting net investments in over- Other comprehensive income was affected in 2014 by SEK –362 million (SEK seas operations into Swedish kronor, –212 m) as a result of hedging in currency futures contracts and borrowing in in conjunction with exchange rate fluc- foreign currencies. tuations, which affects Other compre- hensive income within the Group.

Interest rate Changes in market interest rates Boliden’s financial policy provides the scope for an average fixed interest term of risk affect the Group’s profits and cash up to 3 years. The Group’s loan portfolio had, on 31st December 2014, an aver- flows. The rapidity with which a age fixed interest term of 0.8 years (0.7 yrs.). Interest swaps are used to extend change in interest rate levels affects the fixed interest term. the Group’s net financial items depends on the fixed interest term of the loans.

Sensitivity analysis

SEK m 2014 2013 Net Share- Net Share- Operating financial holders’ Operating financial holders’ Change in metal prices, +10 % 1) profit items Taxes equity profit items Taxes equity Copper 480 8 –107 381 400 7 –90 317 Zinc 620 10 –139 492 485 9 –109 385 Lead 100 2 –22 79 90 2 –20 71 Gold 200 3 –45 159 140 2 –31 111 Silver 155 3 –35 123 140 2 –31 111

Change in exchange rates, +10 % USD/SEK 1,160 19 –259 920 960 17 –215 762 EUR/USD 560 9 –125 444 385 7 –86 306 USD/NOK 115 2 –26 91 85 1 –19 67

TC/RC, +10 % TC/RC copper 100 2 –22 79 90 2 –20 71 TC zinc 40 1 –9 32 40 1 –9 32 TC lead –15 0 3 –12 –10 0 2 –8

Change in market rate, +1 % 2) –77 17 –60 –83 18 –65

Translation exposure, net investments in overseas operations, exchange rate +1%3) NOK/SEK 157 –13 EUR/SEK 501 485

Effect of interest, +1%, Gold +10%, USD/SEK +10% 4) Interest derivatives, interest swaps 40 41 Metal derivatives, gold futures –116 –126 Currency derivatives, USD/SEK –131 –150

1) Based on forecast sales for the coming twelve months. 2) Based on closing day debt portfolio excluding interest swaps (31/12). 3) Based on closing day balances (31/12). 4) Based on outstanding derivatives (31/12).

Risk Description of risk Management

Refinancing The risk that Boliden will be unable Boliden limits the refinancing risk by ensuring that its loan liability has a good spread in and liquidity to extend existing loans or meet terms of counterparties, financing sources and durations. Boliden works actively to risk its payment undertakings due to ensure satisfactory current liquidity by making appropriate use of unutilised credit facili- insufficient liquidity. ties with market- and operations-adjusted loan durations. The refinancing requirement is reviewed regularly by Boliden’s treasury function. The refinancing requirement is dependent, first and foremost, on market trends and investment plans. The loan agree- ments carry loan covenants which oblige Boliden to comply with certain defined key ratio conditions in order to avoid early repayment. A deterioration in the global economic cli- mate may entail increased risks in respect of profit performance and financial position, including the risk of Boliden coming into conflict with loan terms and conditions. Boliden has complied with all loan covenants in 2014. The average term of total loan facilities was 3.4 years (2.6 yrs.) at the end of the year, which is in accordance with established Group policy. On 31st December 2014, Boliden’s payment capacity totalled SEK 5,847 million (SEK 6,356 m) in liquid assets and unutilised binding credit facilities with a term in excess of one year. Boliden has established a cash pool structure that enables it to maintain a central overview of liquid- ity flows and ensures efficient management of the Group’s overall liquidity.

50 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT OPERATIONS | Risk management

Risk Description of risk Management

Credit and Credit risks in financial operations In order to limit credit and counterparty risk, only highly creditworthy counterparties are counterparty The term, credit and counterparty accepted and, wherever possible, the commitment per counterparty is limited. These risk risk, refers to the risk that a coun- restrictions are laid down in Boliden’s financial policy in the form of a lowest acceptable terparty in a transaction may fail to Standard & Poor’s credit rating of A when the transaction is entered into and a maximum fulfil their obligation, thus causing investment of liquid assets per counterparty. The treasury function continuously monitors the Group to incur a loss. Boliden’s exposure to counterparty risks, and the creditworthiness and counterparty spread of financial exposure to counterparty these derivatives is deemed to have been good in 2014. One of Boliden’s financial coun- risk mainly occurs when trading in terparties has an A- credit rating, in a deviation from the minimum permitted rating of A derivative instruments. in the financial policy, as approved by the Board of Directors. On 31st December 2014, the credit risk in derivative instruments corresponded to a market value of SEK 406 mil- lion (SEK 500 m), which relates to Boliden’s receivables from external counterparties. Offsetting of financial assets and liabilities is regulated under ISDA agreements (Inter- national Swaps and Derivatives Association) which handles both offsetting between con- tracted counterparties during day-to-day operations and in conjunction with special cir- cumstances, such as failure to pay. Boliden, during the course of its day-to-day opera- tions, offsets market values in the same currency with a single counterparty that mature at the same time and the excess sum is paid by the party with the biggest liability. In the event of a breach of contract, all outstanding obligations covered by ISDA agreements are terminated in a sum that is paid by the counterparty with the biggest liability.

Credit risks are managed through an established credit rating process, active credit monitoring, short credit periods, and daily routines for monitoring payments. The Credit risks in accounts receivable ­requisite provisions for bad debts are also monitored continuously. The concentration The risk of the Group’s customers of accounts receivable is otherwise low and the credit periods are short. The quality failing to fulfil their obligations con- of the accounts receivable is deemed to be very good. Write-downs of outstanding stitutes a credit risk. accounts receivable on 31st December 2014 have only been effected in very limited amounts and have also, historically speaking, been insignificant. See also Note 19 on page 87, Accounts receivable. Credit insurance is also used from time to time.

Risk manage- The risk of damage or injuries that The objective of the Risk Management function at Boliden is to minimise the total ment and give rise to financial losses. cost of the Group’s damage and injury risks. This is achieved both by continuously insurance enhancing the damage and injury prevention and control work conducted within the operations, and by introducing and developing Group-wide insurance solutions.

Financial The risk of inaccurate financial and Boliden has an efficient internal control structure. Control functions exist both locally, reporting operational reporting. in individual units, and within Business Areas and at the Head Office. All of the functions work within a Group-wide internal control framework for financial reporting that is based on COSO. The framework’s controls are tested annually, both internally and by external auditors. The internal tests have also resulted in the transfer of knowledge and experience between departments and units. The operational reporting is followed up and controlled by the Group’s Controller function, which works closely with the local units and Business Areas.

Other risks

Risk Description of risk Management

Legal risks Boliden conducts extensive opera- Boliden continuously monitors legal developments in relevant spheres and imple- tions and may occasionally become ments, follows up on and ensures compliance with laws, regulations and the directives involved in disputes and legal pro- contained in applicable legislation. Boliden is active in the environmental law sphere, ceedings arising in the course of amongst others, through its membership of industry and trade associations, in the these operations. Boliden’s various form of lobbying activities, and by means of presentations and educational measures operations are, furthermore, for decision-makers and other stakeholder groups. widely subject to licensing require- ments and to wide-ranging environ- Information on legal proceedings and disputes is provided in Note 30 on page 95. mental and other regulations. The continuation of Boliden’s operations is, to a large degree, dependent on the retention of existing licences and the acquisition of new ones.

Political risks Political decisions can have an Boliden and industry organisations are actively involved in lobbying work and are effect in Sweden and the countries often an expert body to which reports are referred for comment ahead of impending in which Boliden and Boliden’s political decisions that impact Boliden’s operations. commercial partners operate.

Risks to Boliden may suffer incidents that Evaluations of customers and suppliers, Boliden’s business partners, are conducted confidence­ adversely affect confidence in the within the framework of Boliden’s CR work before entering into any partnership. This is company, when, for example, suppli- done by means, inter alia, of what is known as an EBP (Evaluation of Business Partners) ers, customers and/or employees checklist. Customer and supplier audits are also conducted, when necessary, to ensure fail to live up to the environmental, that the standards maintained by these parties are as high as those within Boliden. quality, ethical etc. requirements ­Discrepancies can result in termination of the partnership. adhered to by Boliden. Boliden has a crisis management group which has routines to handle events that could damage confidence in the company. These include internal and external com- munication and legal assistance.

DIRECTORS’ REPORT | BOLIDEN ANNUAL REPORT 2014 51 Sustainable development

Boliden’s ambition is to be the first sustainable link in the metals’ value chain by being amongst the industry leaders when it comes to environ­ mental performance, efficiency and responsibility.

Contents Boliden’s employees 54 Boliden’s environmental work 57 Evaluation of business partners 61 Sustainability report in accordance with G4 62 Limited Assurance Report 63 A process operator at the Harjavalta improvements and new technology and copper smelter taps off matte, an inter­ aims to go beyond that which is required mediate product of the smelting pro­ by law and regulations. cess which is then refined to produce One of Boliden’s prioritised areas is that thin copper plates with a purity level of of emissions and discharges to air and at least 99.95 per cent. water, where Boliden’s target level is Boliden has a responsibility to extract well below the limit values mandated by as much as possible from the raw law. Boliden’s goal is for discharges of materials we handle and, at the same metals to water and emissions of metals time, to minimise our impact on people to air to be reduced by 25 per cent and and the environment. Boliden con­ 10 per cent, respectively, between sequently invests continuously in process 2012 and 2018. BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden’s employees Boliden’s employees

To generate value, Boliden must offer its employees safe work environments, stimulating work assignments, skill development programmes, opportunities for career development, and a balance between their professional and private lives.

Boliden’s prioritised areas from an employee perspective for Activities for a safer Boliden the period from 2014 to 2018 are to: Behaviour Based Safety (BBS) training activities have been • Create a safe work environment with healthy employees held since 2014 as an integral part of the work on the New • Secure the future talent pool Boliden Way. • Create diversity and a better gender balance Clear leadership and good role models are important in the creation and maintenance of the safety culture and high levels Create a safe work environment of safety consciousness that we aim to achieve. Group Safety Boliden’s operations entail risks such as handling substantial Walks by the Group management team take place in accordance material flows, high temperatures and, from time to time, with an established schedule, with an increased focus on dis- ­substances that are hazardous to health. A safe work environ- cussing work environment challenges with the personnel and ment is a top priority for Boliden and the Group has adopted contractors involved. a zero tolerance vision for accidents at work. Creating a strong safety culture while simultaneously eliminating risks are the preconditions for achieving this goal. Every individual employee The BSafe programme aimed at raising must accept personal responsibility for behaving safely and awareness of safety and the work associated ­correctly. Consistent and committed leadership at all levels, therewith continued in 2014. committed employees and strong peer pressure that does not tolerate risky behaviour are important cornerstones for improv- BSafe is a concept developed as part of ing occupational safety, and a continuous ongoing dialogue on Boliden’s work with visual, clear and the subjects of health, safety, routines, attitudes and behaviour standard­ised information on safety measures, correct is, therefore, vital. behaviour and correct equipment in all workplaces. BSafe 91 (112) accidents resulting in personal injury that lead to is an important component of building a safety culture in absence from work occurred during the year. No fatal accidents which everyone who wears a BSafe badge undertakes to have occurred within the Boliden Group since 2008. speak out when someone is working in an unsafe way, to The accident frequency (LTI) in 2014 was 7.9 (8.9) for halt production if it poses a clear risk of serious personal Boliden’s own employees, including contractors, corresponding injury, and to encourage everyone to speak out if they, to an improvement of 12 per cent year on year. The goal is to themselves, are behaving in a risky way. reduce the frequency to zero by 2018 and the subsidiary goal for 2015 is 5.3. Two serious work environment incidents occurred in 2014. An underground concrete spraying rig at Boliden’s Tara mine Healthy employees caught fire. The operator driving the rig sounded the alarm and Being healthy is not just good for the individual in question, it all of the other underground personnel successfully sought also promotes Boliden’s success. Reducing the number of people safety in the nearest refuge chamber. Those involved suffered on sick leave is consequently one of Boliden’s more important no lasting physical injuries. The accident resulted in production goals, and this importance is expressed in the form of an estab- being shut down for just over 24 hours to allow for the rescue lished programme of proactive health work. Boliden’s sick leave operation and a comprehensive clear-up programme to be rate increased, however, in 2014 to 4.3 per cent (3.9%). Boliden ­initiated in order to eliminate the risk of similar incidents. The is currently seeking the underlying causes for this increase by, breakdown of a hot leaching tank at Boliden’s Kokkola smelter amongst other measures, analysing the factors that have affected resulted in 370m³ of hot acid being leaked. Five employees were the sick leave trends at the various different units. trapped, close to the process, but suffered no physical injuries. Boliden offers a wide range of health-promoting activities, The event resulted in a Group-wide risk review of tanks and such as recurring spine training, exercise tips, free 24/7 access to ­cisterns of this and similar types. the company gym, staff canteens that specialise in healthy foods, and our recurring quit smoking campaigns. Well-being also requires effective rehabilitation activities – something that is particularly important when it comes to reducing long-term sick leave. The goal of our rehabilitation

54 BOLIDEN ANNUAL REPORT 2014 BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden’s employees

work is to ensure that employees are able to return to their on Boliden’s needs and strategic goals, such as the creation of a ­previous positions, but where this is not possible, Boliden diverse workforce, an increase in the number of women work- strives to offer a position elsewhere within the operations when ing for the Group, and the need to manage the generation shift. appropriate. Talent pools My Opinion – Boliden’s employee survey Boliden, in common with the rest of the sector and much of One of the goals of the New Boliden Way is to create an organi- heavy industry as a whole, is undergoing a generation shift. sation in which employees have the knowledge, the desire and This, coupled with the fact that the Group’s operations are often the opportunity to develop. There are many ways of achieving conducted in regions with a limited recruitment base, demands this goal and the employee survey, My Opinion, offers an that Boliden increases its exposure to the next generation of opportunity to see where Boliden has succeeded and where we employees. The competition for certain occupational categories, could improve. Boliden conducts the survey every other year, such as mining engineers, geologists, geophysicists, process most recently in January 2014. The survey is aimed at all engineers, environmental engineers, chemists, and experienced employees and the response frequency in the 2014 survey was miners, is particularly tough. Boliden’s operational bases all have 82.5 per cent (86.9%). The results of the My Opinion survey their own recruitment plans and are responsible for ensuring were communicated to all employees in workplace meetings in their respective talent pools are filled. order to give them the opportunity to suggest improvements Interesting career opportunities that go hand-in-hand with and to generate action plans for areas where scope for improve- Boliden’s business interests are created by encouraging mobility ment had been identified. within the Group and prioritising internal recruitment in the talent and managerial pools. Securing tomorrow’s talent pool Boliden’s ability to attract, develop and retain employees with Employee development the right skill sets and commitment levels are vital for our com- Boliden offers potential for an individual to grow while remain- petitiveness and a top priority. In a time when many of the ing within the Group and has several skill development pro- employees are reaching retirement age, coupled with the fact grammes designed to generate the preconditions and structures that fewer and fewer students are studying scientific subjects, needed for career and skill planning. Talent pools, leadership the competition for skilled employees is high. development programmes and managerial evaluation pro- Boliden shall provide a safe work environment that is charac- grammes are all key components in Boliden’s success. Special terised by professionalism, good developmental opportunities, reviews, known as Talent Forums, are held with the manage- good leadership and management, and a long-term sustainable ment of every production unit in order to ensure that the right approach. Our skill development and recruitment work is based skills are brought on board. The introduction of a system for

Social goals and results for 2014

Area Indicator Results, 2014 (2013) Goal, 2014 Comments on the results Create a safe LTI frequency1) 7.9 (8.9), total < 6.0 The number of accidents is falling, albeit not work environ­ 5.8 (7.0), own personnel yet at the rate defined in the reduction model ment and adopted in 2014. Work on strengthening the promote­ good safety culture will therefore be further intensi­ health among fied by means of a Group-wide survey in Feb. employees –March 2015. The results will be followed up on and relevant measures implemented at workshops and workplace meetings. Key focus areas are active and committed leader­ ship and work on risk prevention. Sick leave % 4.3 per cent (3.9%) < 3.8 per cent The sick leave rate increased in 2014. Boliden is reviewing its work on rehabilitation and the potential for reassigning employees on sick leave to other positions. Both short-term and long-term sick leave are followed up on and analysed. Proactive health promotion activities will be intensified in 2015. Create diversity The percentage of female 17.5 per cent (17.1%) > 17.6 per cent All units have been implementing local equal and a better employees ­opportunity plans and conducting series of gender balance ­information days as part of the work on increas­ ing the percentage of female employees.

1) LTI frequency – the number of accidents leading to lost time per one million hours worked.

BOLIDEN ANNUAL REPORT 2014 55 BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden’s employees

Boliden is working strategically to increase the percentage of female employees and our goal is for women to make up 20 per cent of the workforce by the end of 2018. Birte Moland, a process operator at the Odda zinc smelter, is one of the women who has joined Boliden’s network for women’s career development.

personnel evaluation and development has resulted, in 2014, The metals industry is traditionally male-dominated and in improvements in the talent management sphere and in although the industry has progressed, e.g. through technological the ongoing improvement work within the framework of the development that has reduced the heavy, manual aspects of New Boliden Way. the job, Boliden still faces a challenge when it comes to attract- For further information, please see Boliden’s website at ing female employees. Boliden’s goal is for at least 20 per cent www.boliden.com of its workforce to be made up of women by the end of 2018 and if we are to achieve this goal, one in every three recruits Talent for the future must be female. At present, 17.5 per cent (17.1%) of Boliden’s Efforts to improve awareness of Boliden among students at uni- employees are women. versities and colleges of further education continued during the Deliberate investments include equal opportunities plans at year and will, in the long term, help grow the recruitment base. all units, recurrent training days, and female networks within One example of these efforts is Boliden’s partnership with the the Group. Luleå University of Technology. A systematic programme of work, with well-defined messages and clear priorities in terms of Work-life balance the activities to be carried out and the fora to be visited, are the Boliden regards a work environment that offers work-life bal- cornerstones of this work. Measurements and rankings among ance as a prerequisite for successfully attracting and retaining students and “young professionals” provide relevant informa- talented employees. This is an important component of ensur- tion, enabling Boliden to track the way in which it is perceived ing our employees’ well-being and their ability to perform. and what these groups are looking for in a future employer. Some of the countries in which Boliden conducts operations ­Surveys have shown, amongst other things, that areas linked to offer economic compensation to employees on parental leave, sustainable development are valued highly in these groups, as and employees on parental leave are also kept informed of what are a work-life balance, an equal opportunities workplace, and is going on and how things are developing at their workplace. personal development – all opportunities offered by Boliden. Boliden has received external acknowledgement of its efforts to create a balance between employees’ work and private lives Diversity and equal opportunities – in 2012, the company received the Unionen trade union Diversity leads to dynamism, creativity and, ultimately, to ­parent-friendly workplace award and in 2013, it was awarded greater profitability. Boliden endeavours to ensure its workforce the Swedish industry’s equality prize. is made up of people with different backgrounds, of different ages, and with different experiences.

56 BOLIDEN ANNUAL REPORT 2014 BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden’s environmental work Boliden’s environmental work Boliden’s environmental work shall reduce the operations’ environmental impact at every stage in the value chain, from exploration to the delivery of finished metals. We do this by implementing continuous improvement work and through technical development, but also through targeted environmental investments designed to reduce emissions and discharges or to restore the natural environment in areas affected by Boliden’s operations.

Environmental impact throughout All of Boliden’s mines and smelters work with ISO 14001 certi- Boliden’s value chain fied environmental management systems and Boliden is also The scale of the operations’ environmental impact varies along currently working to update and certify its energy management the length of the value chain, see illustration on pages 24−25. systems in accordance with ISO 50001. All of the units, with Exploration has no truly significant environmental impact in the exception of Bergsöe and the newly acquired Kylylahti, are and of itself, while mining brings about changes in the land- already certified and these units are expected to introduce scape and causes noise and vibration. Mines and smelters give energy management systems in 2015−2016. The smelters are rise to waste, dust and emissions and discharges of metals to air also quality certified in accordance with ISO 9001. and water. The operations require energy which gives rise to car- bon dioxide emissions, directly or indirectly. The environmental Boliden shall have zero environmental accidents impact is minimised through the use of the best available tech- Boliden’s goal is zero environmental accidents1). Achieving our nology and methodologies. goal demands efficient systems and stable processes at every Boliden’s environmental work is systematic and the relevant stage of the value chain, but also requires a focused programme challenges are identified and selected as part of an ongoing of work with risk assessments, action plans, routines and ­process. The following areas have, as of 2014, been prioritised advanced technology. Individual attitudes are, perhaps, the for the ongoing environmental work: most important factor of all and our work on attitudes and • Minimising our impact on the soil, air and water behaviour is, therefore, critical to our success.

• Efficient use of resources 1) A serious accident that causes significant environmental harm and/or results • Reclamation work and protection of natural values in the limit values prescribed in permits being exceeded.

Environmental goals and results for 2014

Area Indicator Results, 2014 (2013) Goal, 2014 Comments on the results Minimise the Reduce discharges of metals –4.0 per cent (–0.1%) Reduction by 0.9 per cent The year’s emissions of metals impact on the to water1), 2), tonnes to air have exceeded the internal soil, air and goals. This has been caused by Reduce emissions of metals +12 per cent (–3.3%) Reduction by 2.0 per cent water recurring problems with the to air1), 2), tonnes dust filter systems at Boliden’s smelters. No limit values for Reduce emissions of sulphur –11 per cent (–22%) Reduction by 3.6 per cent dust emissions have, however, dioxide to air1), 2), tonnes been exceeded.

Stabilised carbon dioxide 0.74 (0.78) ≤ 0.77 Boliden’s production of metals intensity1) (CO2 emissions has increased while the CO2 per tonne of metal, calcu­ volume has remained stable. lated per production unit), There has thus been a lowering tonne/tonne of the carbon dioxide intensity. Number of environmental 1.1 per month (0.5) 0 Boliden has had nine incidents accidents per month where limit values have been exceeded and four serious inci­ dents. None of these incidents are thought to have caused lasting harm or to have had any significant environmental­ impact.

1) Base year: 2012 2) The number of metals included in the calculation source material for emissions and discharges to air and water has been increased, as of 2012. New point sources have been added, as of 2012, for discharges of metals to water and SO2 emissions to air. Comparison figures for 2012 and 2013 have, therefore, been corrected from those previously reported. See also pages 21 and 116 for additional explanations.

BOLIDEN ANNUAL REPORT 2014 57 BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden’s environmental work

The reclamation work that will be carried out to restore the area, so that it is once more a natural part of the surrounding landscape, is determined already in conjunction with the planning of a new mine. The illustration shows the water-covered tailings pond in Stekenjokk.

There were 13 (6) environmental accidents in 2014, of which ing of the work carried out. The specific area’s preconditions, nine involved accidents where limit values were exceeded. Several such as infiltration, watercourses or groundwater levels are cru- of the accidents where limit values were exceeded during the year cial in determining which method to use. Identifying and plan- related to internal landfill limits and hence had no impact on the ning for environmental consequences in this way before a mine environment outside of the actual industrial area. Both mines even becomes operational ensures that a good environmental and smelters reported short-term discharges of untreated water performance can be achieved throughout the lifespan of the in conjunction with heavy precipitation in 2014. None of the mine and that reclamation work is conducted on a rolling basis. accidents resulted in lasting damage or any significant environ- Boliden has a direct reclamation responsibility for some 30 mental impact, but did demonstrate the need for stepped-up active and closed down mining areas and conducts a systematic action in terms of preparing the operations to handle increasing programme of monitoring and risk analyses for every area. A total quantities of precipitation and Boliden’s operations will, there- of SEK 2,057 million (SEK 1,651 m) had been allocated for the fore, introduce systems designed to improve the control and reclamation of mining areas and smelters by the end of 2014. monitoring of water management in 2015. Boliden’s ongoing results in relation to its environmental Dam safety goals are monitored by the Group’s management group on a Boliden is currently responsible for around 40 dam facilities monthly basis, with the exception of the carbon dioxide goal, which have been used, or are being used, to deposit tailings sand which is followed up quarterly. The results are also presented or other waste and for water management. Inspections and mon- every quarter in the company’s Interim Reports. itoring are carried out on all of Boliden’s dams, both during and after their operational lives. The intervals between and scope of Impact on the physical environment the inspections is determined by the dam’s consequence classifi- Boliden’s operations utilise large areas of land for exploration cation. Every operating unit with its own dam has a Dam Safety activities, mining operations, industrial parks, and tailings and Manager and a Dam Operations Manager. Boliden endeavours clarification ponds. Soil conservation and reclamation of min- to minimise its impact in the surrounding area, both during con- ing areas that are reaching the end of their productive lives are, struction and use and after the dams’ operating lifespans. therefore, an integral part of Boliden’s operations and respons­ Boliden’s dam safety work since the turn of the millennium has ibilities. The reclamation work that will be carried out in order been conducted in accordance with the guidelines for dam safety to restore the area so that it becomes a natural part of the sur- (GruvRIDAS) issued by the Swedish mining industry associa- rounding landscape again is part of the process right from the tion, SveMin, which regulate, amongst other things, the scope of start, when a mine is still at the planning stage. Reclamation and and intervals between inspections and monitoring of the dams. conservation are also an integral part of the day-to-day opera- tions and are conducted in parallel with them, e.g. in the form Forestry and land management of covering and seeding one part of the mining area while ore is Boliden owns more than 20,000 hectares of land. Boliden needs being extracted in another. Boliden’s goal is to use the best poss­ the land to carry out its exploration work and thereby expand its ible technology and to combine this with continuous monitor- operations. Boliden’s forestry is FSC (Forest Stewardship Council)

58 BOLIDEN ANNUAL REPORT 2014 BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden’s environmental work

certified in order to promote an environmentally responsible­ Water management is critical in maintaining the quality in the and economically viable approach to forestry, which helps water that is discharged into recipients. Heavy precipitation is Boliden to ensure that economic, environmental and social one of the main risks to Boliden’s ability to meet applicable limit responsibility is applied to all aspects of its forestry operations. levels as the water treatment capacity is not always sufficient to Boliden also conducts ongoing internal and external audits handle the occasional sharp rise in water levels. based on FSC requirements. Boliden endeavours, in conjunc- tion with all forestry-related activities, transportation and other Emissions to air activities in conjunction with our forestry work, to use input Boliden’s most significant emissions to air comprise both the goods and consumables that are environmentally friendly and metal and sulphur dioxide emissions formed by the smelters’ pro- recyclable. Only those substances and techniques that are cess gases and the direct emissions of carbon dioxide from metal- approved within the framework of FSC, or which have been lurgical processes and transportation. Some diffuse emissions of approved by the Swedish Forest Agency may be used. Boliden dust arising from open materials handling, for example, are gen- has designated approximately 10 per cent of its productive for- erated over and above the emissions released into the atmosphere ested land as nature conservation areas, which is considerably in a controlled way via smokestacks. A programme has been more than the amount required for certification. ongoing in 2014 with the objective of drawing up action plans that will increase Boliden’s control over and reduce the scale of Emissions and discharges to air and water the company’s diffuse emissions at all production units. The process of extracting metals generates emissions and dis- The indirect carbon dioxide emissions from the electricity charges and Boliden is responsible for continuously managing purchased by Boliden account for just under half of the company’s and minimising these emissions and discharges and their neg­ total carbon dioxide emissions, based on Boliden’s chosen calcu- ative effects. Stable processes that can be run with the fewest lation method. One industry-wide phenomenon that has im- possible maintenance shutdowns are important in reducing these pacted Boliden is the fall, on average, in the metal grades of the emissions and discharges and Boliden is, to this end, continu- ores extracted, which means that the ore requires additional ously investing in process improvements and new technologies. ­processing, resulting in an increase in energy consumption per A completely new production facility – mine and concentrator tonne of metal produced. Deteriorations in the quality of the – with a higher degree of automation was brought on line in smelters’ input raw materials result in reduced recovery and, Garpenberg during the year, helping ensure a higher level of hence, in emission increases per tonne of metal produced. operational reliability and resource efficiency. As part of its efforts to reduce its carbon dioxide emissions, Reducing emissions and discharges of metals, nitrogen, Boliden exploits the surplus heat generated at the smelters. ­sulphur dioxide and carbon dioxide, and reducing diffuse dust It is estimated that approximately 570 (602) GWh was used emissions to the air in order to maintain good air and water internally in 2014 and that 799 (775) GWh was supplied to quality have always been high priority areas for Boliden’s envir­ external users. onmental work, and will continue to be so. The mode of transport used also affects Boliden’s carbon dioxide emissions. Most of the transportation within the mine Discharges to water areas uses diesel vehicles, although recent investments in electri- The primary environmental impact of discharges to water lies in the risk that the affected bodies of water and their beds are contaminated by foreign substances that may disturb their natural­ balance. Boliden’s operations use large amounts of water, and reusing the water and returning it to the processes enables Boliden to reduce both its water withdrawal and its discharges. Boliden’s discharges to water nowadays mainly comprise ­metals and nitrogen. 66 per cent (78%) of the metal discharges come from the smelters’ water treatment plants that also treat the rainwater that falls on the industrial park area. Boliden’s mines account for the remaining 34 per cent (22%) in the form of discharges from tailings ponds at the mines’ concentrators and water treatment plants. Rainwater that falls within the industrial park areas is also treated. The mining operations account for 77 per cent (70%) of Boliden’s nitrogen discharges, which result mainly from the use Boliden performs regular measurements of the emissions and dis­ charges to air, soil and water in the vicinity of existing and closed- of explosives. The other 23 per cent (30%) come from the sedi- down operations. mentation tank at the Kokkola zinc smelter.

BOLIDEN ANNUAL REPORT 2014 59 BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden’s environmental work

fied conveyor belts, for example, have reduced the need for fossil fuels. Approximately 70 per cent of the transportation of metal concentrates and other smelting materials is done by ship or rail. The transport of finished metals from the smelters is primarily by ship or rail within Europe, and often involves reloading on to trucks for the final stretch of the journey to the customer. All of Boliden’s smelters are subject to the EU’s system for trading in carbon dioxide emissions rights, ETS. The smelters received a preliminary allocation of emission rights for the period from 2013 to 2020 of 3.87 Mtonnes of carbon dioxide, which corresponds to the forecast emissions for that period. Boliden applies transparent reporting of its climate control work and has been recognised for this in the CDP’s Climate Disclosure Leadership Index (CDLI) in 2014.

Energy supply The origins of the electricity Boliden uses is determined by the energy mix provided by the different countries in which the Group operates. Hydroelectricity predominates in Norway, while hydroelectricity and nuclear power are the main sources used in Sweden, and in Finland, a combination of different sources are employed. In Ireland, a higher percentage of the Metals can be recycled over and over again without losing any of their quality. Boliden’s Rönnskär copper smelter is the world’s big­ energy used is derived from fossil fuels. gest recycler of electronic scrap. Boliden intends to improve its energy usage efficiency and to break the trend of rising carbon dioxide intensity (the amount of carbon dioxide emitted in relation to the amount of metal produced) that has continued for a number of years now. As an ­Remuneration for processing waste is not paid until documenta- initial step towards this goal, Boliden intends to stabilise its car- tion has been provided confirming that the work is completed. bon dioxide intensity at 2012 levels, after which it will focus on A legal requirement to permanently store process waste with reducing emissions. Mapping work carried out internally has a certain mercury content underground will shortly come into shown that process optimisations and more efficient recovery of force. Boliden generates mercury-bearing waste, and the Kokkola surplus heat are the most cost-effective ways of reducing carbon and Odda smelters already use underground permanent storage dioxide emissions, but that substantial potential also exists in facilities for this type of waste. In 2014, the Rönnskär smelter the form of replacing fossil fuels with electric propulsion. was granted a permit to begin work on the construction of an underground storage facility for waste previously stored within Waste management the industrial park area. Boliden’s mines and smelters generate waste comprising waste rock, tailings sand, slag, sludge and dust. Boliden’s waste manage- Recycling ment is not just about minimising and processing end waste, it is Metals can be recycled endlessly without any deterioration in also about converting waste into raw materials, in that some of their quality. It is important, therefore, that electronic materials the waste generated can be used as a raw material in another pro- and scrap, such as telephone cables, copper roofs and copper cess. The Group’s waste products are sent to other companies for pipes, from the demolition or construction of buildings and extraction in the same way as Boliden receives other companies’ infrastructure is reutilised. The Rönnskär smelter is the world’s waste products for metal extraction, thereby enabling the amount biggest recycler of electronic material, and 45 per cent (50%) of of end waste that has to be sent to landfill to be minimised. the gold, 25 per cent (30%) of the copper, 20 per cent (30%) of Boliden always attempts to identify internal solutions for the silver, and 65 per cent (70%) of the zinc produced there recycling­ waste products or sending them to landfill. Two new comes from recycled materials. rock caverns for storing jarosite waste were constructed in 2014, Bergsöe – the only smelter in the Nordic region that recycles close to the Odda smelter. In cases where the best solution entails lead – is another shining example, producing approximately exporting a waste product to another country, the process is sub- 50 Ktonnes of lead each year, 100 per cent of which comes from ject to the legislation governing the export of waste to landfill scrap car batteries. sites or for recycling. Boliden also has its own routines for ensur- ing that waste is handled correctly and safely and will, when ­necessary, conduct external audits of waste recipient sites.

60 BOLIDEN ANNUAL REPORT 2014 BOLIDEN’S SOCIAL RESPONSIBILITY | Evaluation of business partners Evaluation of business partners

For the past couple of years now, Boliden has included sustainability issues in its ­evaluation of business partners. Thereby a dialogue is established on the ways in which the industry can, at an overall level, bring about improvements in social and environmental responsibility.

Boliden’s suppliers and customers mented are followed up. Boliden’s goal is for all of its business In 2010, Boliden instituted a process for evaluating its business partners to show real commitment to continuous improvement. partners with regard to their approach to business and sustain­ ability – the Evaluation of Business Partners (EBP). The choice Trading in materials and waste of business partner has a significant impact on Boliden’s profit­ Boliden complies with national legislation and international ability and an indirect impact on sustainability performance guidelines such as the OECD guidelines for trade in materials, and it is important, therefore, that Boliden works together with waste and hazardous waste, and for some years now, Boliden its partners to develop a high level of sustainability. has been implementing a strict internal policy regarding such Boliden’s suppliers can be divided into those who supply transactions. This means that the operator who handles mater­ metal concentrates and secondary raw materials, and those who ial received from Boliden for processing or permanent storage supply other input goods and services. does not receive payment in full until they can produce docu- mentation demonstrating that the material has been processed. Evaluation of business partners This clause is included in all of Boliden’s agreements. Boliden’s business partners are evaluated with regard not only to commercial aspects, but from a sustainability viewpoint that is Conflict minerals based on the 10 principles of the UN’s Global Compact and on Boliden produces around 15 tonnes of gold every year from ILO and ISO standards. These conventions address such areas mined concentrate and recycling. Boliden’s policy is that no as human rights, working conditions, environmental respons­ concentrate shall be acquired from areas of armed conflict. The ibility and systematic environmental work, anti-corruption, secondary raw material is, however, more difficult to control as and the way in which the business partners follow up on and it may have passed through several links in the supply chain evaluate their own sustainability work. before it reaches Boliden. In 2014, approximately 100 business partners have com- The Rönnskär smelter is included in “The London Good pleted the self-assessment process, which is a tool designed to Delivery list of Acceptable Refiners”. Boliden must, in order to evaluate the work in areas that Boliden has identified as being of ensure its continued inclusion in the London Bullion Market particular importance. The aim is to develop and improve the Association’s list of recommended gold producers, ensure that sustainability work by all parties. Every departmental manager the raw materials chain complies with a number of ethical at Boliden is responsible for ensuring that his or her depart- ­criteria, and must comply with stringent standards for docu- ment’s business partners complete the evaluation process. mentation and transparency. Audits of business partners are carried out in special cases and any deviations from standards and remedial measures imple-

Activity Result, 2014 Result, 2013 Comments Number of 149 105 Evaluations take place before contracts are concluded, self-assessments with follow-ups after 2−5 years.

Responses received 99 62 Self-assessments constitute the basis for an initial risk assessment.

Number of dialogues 42 84 In-depth risk assessment and an opportunity to discuss improvements.­

Number of visits 23 26 Following up on any deviations and measures implemented. It is part of Boliden’s strategy to assist in the development of individual suppliers.

BOLIDEN ANNUAL REPORT 2014 61 BOLIDEN’S SOCIAL RESPONSIBILITY | Boliden reports in accordance with G4 Sustainability report in accordance with G4

Boliden values open and accessible communication with regard to the company’s sustainability­ work. Boliden has reported in accordance with the GRI guidelines since 2005, and sustainability information has been integrated into the various sections of the Annual Report since 2012. A separate GRI report is also compiled.

Boliden’s Annual Report includes an overall account of the areas were employees, customers, investors, neighbours, and authori- defined by the company as the focal areas for its sustainability ties. The stakeholder dialogues confirmed Boliden’s priorities work. Boliden has also, since 2011, prepared a separate and and goals. The analysis and dialogues identified additional more detailed GRI report. Together with the Annual Report, aspects as being of importance, over and above those already this report provides a comprehensive account of Boliden’s sus- reported by Boliden. The GRI report is available on Boliden’s tainability work, management and results. The 2014 report is website and includes Boliden’s complete GRI index, a descrip- the first to be prepared by Boliden in accordance with the GRI’s tion of the materiality analysis and stakeholder dialogues, and latest guidelines, G4. Boliden has complemented the materiality reports on management and selected indicators. analysis initiated when the company’s new sustainability goals The following table provides an overview of Boliden’s material for the period from 2014 to 2018 were formulated, in order to aspects, a reference to applicable GRI indicators, and details of comply with the requirements imposed by GRI. Additional calib­ where to find relevant information in the Annual Report and/or ration work has been conducted in 2014 with the aid of internal the GRI report. For a more detailed report on Boliden’s work, and external stakeholders. The stakeholder groups that took part processes and results please see the GRI report.

Indicator, Annual Indicator, Annual Material aspect as per G4 Report GRI report Material aspect as per G4 Report GRI report Category: Economic – Human rights Economic results EC1, EC2, EC3, 20, 32, 2, 14–15 Non-discrimination HR3 56 35 EC4 47, 88–91 Indigenous rights MM5 35 Market presence EC6 38–39, 16 Assessment HR9 35 40–45 Supplier Human rights HR10 61 36 Indirect economic effect EC8 16 Assessment Category: Environmental Human rights HR12 36 Materials EN1, EN2 24–25, 60 18 Grievance Mechanisms Energy EN3, EN5, EN6 24–25, 60 19–20 – Society Water EN8, EN10 24–25, 59 20 Local communities SO1, MM6, 37 MM7 Biodiversity EN11, EN13, 58 21–22 MM1 Resettlement MM9 37 Emissions EN15, EN 16, 24–25, 23–24 Closure planning MM 10 91 37 EN18, EN19, 57, 59, Emergency DMA only 38 EN21 116 preparedness Effluents and Waste EN22, EN23, 24–25, 59 25–26 Anti-corruption SO4, SO5 38 EN24, MM3 Anti-competitive SO7 39 Compliance EN29 51 26 ­behaviour Transport EN30 26–27 Compliance SO8 51 39 Supplier Environmental EN32 61 27 – Product responsability Assessment Material stewardship MM11 40 Environmental EN34 27 Grievance Mechanisms Product and service PR3, PR5 40 ­labelling Category: Social – Working conditions Employment LA1, LA2 54–56 28–29 Labour/Management LA4, MM4 29–30 ­Relations Occupational Health LA5, LA6, LA7, 47, 54 30–31 and Safety LA8 Training and Education LA9, LA10, LA11 55–56 32 Diversity and LA12 56 33 Equal ­Opportunity Equal Remuneration for LA13 33 Women and Men Supplier Assessment LA14 61 34 for Labour Practices Labour Practices LA16 34 ­Grievance Mechanisms

62 BOLIDEN ANNUAL REPORT 2014 BOLIDEN’S SOCIAL RESPONSIBILITY | Auditor’s Limited Assurance Report Auditor’s Limited Assurance Report on Boliden AB’s Sustainability Report

To Boliden AB We conducted our limited assurance engagement in accordance with RevR 6 Assurance of Sustainability Reports issued by FAR. Introduction A limited assurance engagement consists of making inquiries, We have been engaged by Boliden AB to undertake a limited primarily of persons responsible for the preparation of the assurance engagement of the Boliden AB’s Sustainability Report Sustainability­ Report, and applying analytical and other limited for the year 2014. The Company has defined the scope of the assurance procedures. The procedures performed in a limited Sustainability Report in the GRI index on pages 10–13 in the assurance engagement vary in nature from, and are less in extent GRI Report. than for, a reasonable assurance engagement conducted in accordance with IAASB’s Standards on Auditing and Quality Responsibilities of the Board of Directors Control and other generally accepted auditing standards in and the Executive Management for the ­Sweden. The procedures performed consequently do not enable Sustainability Report us to obtain assurance that we would become aware of all sig­ The Board of Directors and the Executive Management are nificant matters that might be identified in an audit. Accordingly, responsible for the preparation of the Sustainability Report in we do not express a reasonable assurance opinion. accordance with the applicable criteria, as explained on pages Our limited assurance engagement is based on criteria chosen 6–10 in Boliden’s GRI Report, and are the parts of the Sustain­ by the Board of Directors and the company management, as ability Reporting Guidelines, published by The Global Report- defined above. We consider these criteria suitable for the pre­ ing Initiative (GRI), which are applicable to the Sustainability paration of the Sustainability Report. We believe that the evidence Report, as well as the accounting and calculation principles that we have obtained is sufficient and appropriate to provide a basis the Company has developed and disclosed. This responsibility for our conclusions below. also includes the internal controls deemed necessary to prepare a ­sustainability report that is free from material misstatement, Limited Assurance Conclusion whether due to improprieties or to errors. Based on the limited assurance procedures we have performed, nothing has come to our attention that causes us to believe that Responsibilities of the auditor the Sustainability Report is not prepared, in all material respects, Our responsibility is to express a limited assurance conclusion in accordance with the criteria as selected by the Board of Dir­ on the Sustainability Report based on the procedures we ectors and the company management and stated above. have performed.

Stockholm 19th February 2015 Ernst & Young AB

Helene Siberg Wendin Håkan Ulrichs Authorized Public Accountant Partner, Climate Change and Sustainability Services

BOLIDEN ANNUAL REPORT 2014 63 Financial reporting

Contents Note 10 Supplementary informa- 80 Note 23 Provisions for pensions 88 The Group 66 tion to the Statements and similar undertakings The Parent Company 70 of Cash Flow Note 24 Other provisions 91 Note 1 Significant accounting and 71 Note 11 Operational acquisitions 81 Note 25 Risk information 91 valuation principles Note 12 Intangible fixed assets 82 Note 26 Financial liabilities and 92 Note 2 Information per segment 77 Note 13 Tangible fixed assets 83 maturity structure and geographical market Note 14 Leasing charges 84 Note 27 Financial derivative 92 78 Note 3 Employees and instruments personnel costs Note 15 Participations in 85 Group companies Note 28 Other current liabilities 93 Note 4 Auditors’ fees and reim- 80 bursement of expenses Note 16 Participations in 85 Note 29 Financial assets and liabili- 94 associated companies ties by valuation category Note 5 Key expense items 80 Note 17 Taxes 86 Note 30 Pledged assets and 95 Note 6 Other operating income 80 Note 18 Inventories 87 contingent liabilities Note 7 Interest income and other 80 Note 19 Accounts receivable 87 Note 31 Events after 95 similar items 31st December 2014 Note 8 Interest expenses and 80 Note 20 Other current receivables 87 other similar items Note 21 Affiliates 87 Proposed allocation of profits 96 Note 9 Government subsidies 80 Note 22 Shareholders’ equity 88 Auditor’s Report 97 Per Lindsköld, a survey technician in the The Boliden Area is located in the mineral- Boliden Area (left) collects geophysical rich Skellefte field that has yielded almost data with the help of electromagnetic 30 separate mines since production measurement equipment developed in- began in the 1920s. The mines produce house by Boliden. This equipment can complex ores containing zinc, copper, detect deposits at a depth of 1 km, lead, gold and silver. Many of the metals which is very useful because Boliden’s are used in medical equipment and to exploration work is often conducted in protect against X-rays, etc. areas with deep-lying minerals. FINANCIAL REPORTING | The Group The Group

Income Statement

Amounts in SEK million Note 2014 2013 Revenues 2 36,891 34,409 Cost of goods sold 5 –32,905 –31,419 Gross profit 3,986 2,989

Selling expenses 5 –341 –340 Administrative expenses 4, 5 –539 –525 Research and development costs 5 –395 –405 Other operating income 6 102 102 Other operating expenses –58 –18 Results from participations in associated companies 16 3 2 Operating profit 2–6, 9,11–14 2,759 1,803

Interest income and other similar items 7 3 31 Interest expenses and other similar items 8 –291 –253 Profit after financial items 2,471 1,581

Taxes 17 –572 –288 Net profit for the year 1,899 1,294 Net profit for the year attributable to: The Parent Company’s shareholders 1,898 1,291 Minority holdings 2 3

Earnings per share, SEK 22 6.94 4.72 There are no potential shares and hence no dilution effect Average number of shares, basic and diluted 273,511,169 273,511,169

The Consolidated Statement of Comprehensive Income

Amounts in SEK million Note 2014 2013 Net profit for the year 1,899 1,294

Other comprehensive income

Items that will be reclassified to the profit/loss Cash flow hedging Change in market value of derivative instruments –229 728 Fiscal effect on derivative instruments 50 –160 Transfers to the Income Statement –33 –200 Tax on transfers to the Income Statement 7 44 –204 412

Year’s translation difference when converting overseas operations 277 168 Result of hedging of net investments in overseas operations –362 –212 Tax on the net profit for the year from hedging instruments 80 47 –4 3

Total items that will be reclassified to the profit/loss –208 415

Items that will not be reclassified to the profit/loss Revaluation of defined benefit pension plans –399 142 Tax attributable to items not reversed to the profit/loss for the period 96 –35 Total items that will not be reclassified to the profit/loss –303 107 Total other comprehensive income –510 522 Comprehensive income for the year 1,389 1,816

Comprehensive income for the year attributable to: The Parent Company’s shareholders 1,387 1,813 Minority holdings 2 3

66 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | The Group The Group

Balance Sheet

Amounts in SEK million Note 31-12-2014 31-12-2013 ASSETS Fixed assets Intangible fixed assets 12 3,516 3,130 Tangible fixed assets 13 Buildings and land 4,677 4,626 Deferred mining costs 6,160 5,132 Machinery and other technical facilities 17,021 16,768 Equipment, tools, fixtures and fittings 288 183 New construction work in progress 476 638 28,623 27,348 Other fixed assets Participations in associated companies 16 19 9 Other shares and participations 26 24 Deferred tax receivables 17 17 68 Long-term receivables 94 98 156 199 Total fixed assets 32,295 30,677

Current assets Inventories 18 7,885 8,031 Accounts receivable 19 1,344 1,048 Tax receivables 92 94 Interest-bearing receivables 3 3 Derivative instruments 27 406 500 Other current receivables 20 976 877 Liquid assets 10 865 611 Total current assets 11,570 11,164 TOTAL ASSETS 43,865 41,841 SHAREHOLDERS’ EQUITY AND LIABILITIES Shareholders’ equity 22 Share capital 579 579 Other capital contributed 5,940 5,941 Translation reserve –78 –74 Hedging reserve 63 267 Defined benefit pension plans –745 –442 Profit carried forward 18,209 16,788 Shareholders’ equity attributable to the Parent Company’s shareholders 23,968 23,059

Minority holdings 7 16 Total shareholders’ equity 23,974 23,075

Long-term liabilities Provisions for pensions 23 1,468 1,047 Other provisions 24 1,875 1,512 Deferred tax liabilities 17 2,862 2,852 Liabilities to credit institutions 26 4,819 4,346 Other interest-bearing liabilities 26 19 4 Total long-term liabilities 11,043 9,761

Current liabilities Liabilities to credit institutions 26 2,845 3,948 Other interest-bearing liabilities 26 0 9 Accounts payable 26 3,764 3,636 Other provisions 24 244 169 Current tax liabilities 77 13 Derivative instruments 27 425 36 Other current liabilities 28 1,493 1,194 Total current liabilities 8,847 9,005 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 43,865 41,841

Pledged assets 30 None None Contingent liabilities 30 2,281 1,608

BOLIDEN ANNUAL REPORT 2014 67 FINANCIAL REPORTING | The Group The Group

Changes in shareholders’ equity

Amounts in SEK million Note

Shareholders’ equity attributable to the Parent Company’s shareholders Defined Total – Total Other Trans­ benefit Profit Boliden’s share- Share capital lation Hedging pension carried share- Minority holders’ capital contrib. reserve reserve plans forward holders holdings equity 22

Balance Sheet, 31-12-2012, Restatement1) 579 5,941 –77 –145 –549 16,591 22,34 14 22,354 Net profit for the year – – – – 1,291 1,291 3 1,294 Other comprehensive income – – 3 412 107 – 522 – 522 Comprehensive income for the year – – 3 412 107 1,291 1,813 3 1,816 Dividend to Boliden AB’s shareholders – – – – – –1,094 –1,094 – –1,094 Dividend to minority interests – – – – – – – –1 –1

Closing balance on Balance Sheet, 31-12-2013 579 5,941 –74 267 –442 16,788 23,059 16 23,075

Balance Sheet 31-12-2013 579 5,941 –74 267 –442 16,788 23,059 16 23,075 Net profit for the year – – – – 1,898 1,898 2 1,899 Other comprehensive income – – –4 –204 –303 – –510 – –510 Comprehensive income for the year – – –4 –204 –303 1,898 1,387 2 1,389 Change in minority holding – –1 – – – – – –10 –10 Dividend to Boliden AB’s shareholders – – – – – –479 –479 – –479 Dividend to minority interests – – – – – – – –1 –1

Closing balance on Balance Sheet, 31-12-2014 579 5,94 –78 63 –745 18,209 23,968 7 23,974

1) Figures restated by reason of alterations to accounting standards, see also Note 1 Significant accounting and valuation principles.

Other capital contributed Hedging reserve Refers to shareholders’ equity contributed by the owners. When Boliden applies hedge accounting for financial derivatives acquired shares are issued at a premium, an amount corresponding to the with a view to hedging part of the forecast currency, metal and inter- amount received in excess of the nominal value of the shares is est flows. Changes in the market value of hedging instruments are reported as other capital contributed. reported under Other comprehensive income until such time as the underlying flows are reported in the Income Statement. Translation reserve The current method is applied to convert the Income Statements Defined benefit pension plans and Balance Sheets of overseas subsidiaries. Any exchange rate dif- Revaluations of pension undertakings have been reported under ferences arising are reported under Other comprehensive income. Other comprehensive income since 2013. Boliden currency hedges net investments in overseas subsidiaries by adopting the opposite position in the relevant foreign currency. The Profit carried forward exchange rate difference on hedging instruments is, after the fiscal Refers to profit earned. effect, reported under Other comprehensive income.

Net debt, SEK m 31-12-2014 31-12-2013 Capital employed, SEK m 31-12-2014 31-12-2013 Liabilities to credit institutions 7,664 8,294 Intangible assets 3,516 3,130 Other interest-bearing liabilities 19 13 Tangible assets 28,623 27,348 Pension liabilities 1,468 980 Participations in assoc. companies 19 9 Short-term interest-bearing Other shares and participations 26 24 assets –3 –3 Inventories 7,885 8,031 Short-term investments 0 0 Accounts receivable 1,344 1,048 Cash and bank balances –865 –611 Other receivables 1,476 1,475 8,283 8,673 Provisions, other than for pensions and tax –2,119 –1,681 Accounts payable –3,764 –3,636 Other non-interest-bearing liabilities –1,918 –1,296 35,087 34,451

68 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | The Group The Group

Consolidated Statements of Cash Flow

Amounts in SEK million Note 2014 2013 10 Operating activities Profit after financial items 2,471 1,581 Adjustment for items not included in the cash flow: Depreciation, amortisation and write-down of assets 12, 13 3,277 2,832 Provisions –12 –200 Revaluation of process inventory1) –154 – Translation differences and Other –39 141 Tax paid –242 –303 Cash flow from operating activities before changes in working capital 5,301 4,052

Cash flow from changes in working capital Increase (–)/Decrease (+) in inventories 381 216 Increase (–)/Decrease (+) in operating receivables –425 –177 Increase (+)/Decrease (–) in operating liabilities 533 –580 Other – –5 Cash flow from operating activities 5,789 3,505

Investment activities Acquisition of operations 11 –718 – Acquisition of intangible fixed assets 12 –9 –16 Acquisition of tangible fixed assets 13 –3,482 –4,954 Sale of tangible fixed assets 3 – Acquisition of financial fixed assets –1 –3 Other – 2 Cash flow from investment activities –4,206 –4,971

Free cash flow 1,583 –1,465

Financing activities Dividend –479 –1,095 Loans raised 11,969 12,101 Amortisation of loans –12,844 –9,946 Cash flow from financing activities –1,355 1,060 Cash flow for the year 228 –406 Opening liquid assets 611 1,011 Liquid assets acquired 23 – Exchange rate difference on liquid assets 3 6 Closing liquid assets 10 865 611

1) The revaluation of process inventory will, as of Q1 2014, be adjusted under “Adjustments for items not included in the cash flow” rather than, as before, in the Cash flow from changes in working capital.

BOLIDEN ANNUAL REPORT 2014 69 FINANCIAL REPORTING | The Parent Company The Parent Company

Income Statements Changes in shareholders’ equity

Amounts in SEK million Note 2014 2013 Amounts in SEK million

Dividends from subsidiaries 15 464 2,442 Non- restricted Total Write-down of participations Statu- share­ share­ in Group companies –12 – Share tory holders’ holders’ Profit after financial items 451 2,442 capital reserve equity equity

Taxes – – Closing balance on Net profit for the year 451 2,442 Balance Sheet, 31-12-2012 579 5,252 5,103 10,934 The operations of Boliden AB are limited in scale and are con- Dividend – – –1,094 –1,094 ducted on its behalf by Boliden Mineral AB, which means that Net profit for the year – – 2,442 2,442 the profit is reported as part of Boliden Mineral AB. Boliden AB has no sums to report under Other comprehen- Closing balance on sive income. Balance Sheet, 31-12-2013 579 5,252 6,451 12,282 Dividend – – –479 –479 Net profit for the year – – 451 451

Balance Sheets Closing balance on Balance Sheet, Amounts in SEK million Note 31-12-2014 31-12-2013 31-12-2014 579 5,252 6,424 12,255

ASSETS The statutory reserve includes amounts which, prior to 1st January Fixed assets 2006, were transferred to the share premium reserve. The profit ­carried forward comprises, together with the net profit for the year, Financial fixed assets the total non-restricted equity. The non-restricted shareholders’ equity Participations in in the Parent Company is available for distribution to the shareholders. Group companies 15 3,911 3,911 Participations in other companies 5 5 Long-term receivables from Group companies 8,338 8,365 Statements of cash flow Total fixed assets 12,255 12,282 Amounts in SEK million 2014 2013 Current receivables Current receivables from Operating activities Group companies 3,014 3,641 Profit after financial items 451 2,442 Total current assets 3,014 3,641 Adjustments for items not TOTAL ASSETS 15,269 15,923 included in the cash flow: Write-down of participations SHAREHOLDERS’ EQUITY in Group companies 12 – AND LIABILITIES Cash flow from operating Shareholders’ equity 22 ­activities 464 2,442 Restricted equity Financing activities Share capital 579 579 Loans raised 10,214 11,920 Statutory reserve 5,252 5,252 Amortisation of loans –10,840 –9,546 5,831 5,831 Dividend –479 –1,094 Non-restricted equity Loans to Group companies 641 –3,722 Profit carried forward 5,973 4,009 Cash flow from financing Net profit for the year 451 2,442 ­activities –464 –2,442 6,424 6,451 Cash flow for the year – – Total shareholders’ equity 12,255 12,282 Opening liquid assets – – Liabilities Closing liquid assets – – Long-term liabilities to credit institutions 26 500 – Short-term liabilities to credit institutions 26 2,514 3,641 Total liabilities 3,014 3,641 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 15,269 15,923 Pledged assets None None Contingent liabilities 30 8,084 8,767

70 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Notes 01 02

03

All amounts are in SEK million unless otherwise stated. All notes refer to the Group unless otherwise stated. 04

Note 01 Significant accounting and valuation principles 05

06 General Accounting Principles IAS 32, Financial instruments: Presentation (revised). The revision of the Boliden AB (publ.) Swedish corporate ID no. 556051-4142, is a limited standard provides a clarifying guideline stating that financial assets and 07 liability company registered in Sweden. The company’s registered office is liabilities shall be offset against one another when this reflects the compa- in Stockholm at the address: Klarabergsviadukten 90, SE-101 20 Stock- ny’s anticipated cash flows when settling two or more financial instru- 08 holm. The Boliden share is listed on NASDAQ Stockholm’s Large Cap ments. Boliden has entered into ISDA (International Swaps and Deriva- list. On 3rd April 2013, the Boliden share was voluntarily delisted from tives Association) agreements that regulate offsetting between contracted 09 the Toronto Stock Exchange (TSX) in Canada where the Boliden share counterparties during operating activities and in conjunction with cir- previously had a secondary listing. The final trading day for the Boliden cumstances relating to breach of contract or early termination for all of its 10 share on TSX was 23rd April 2013. financial instruments. The amended standard has had no significant effect The Company is the Boliden Group’s Parent Company, whose princi- on Boliden’s financial reporting. 11 pal operations involve the mining and production of metals and opera- IAS 36, Impairment of assets (revision): The amendment provides clar- tions compatible therewith. ification with regard to disclosures relating to the recoverable amount of 12 The Consolidated Statements have been compiled in accordance with the non financial assets. Clarification has also been provided with regard to EU-approved International Financial Reporting Standards (IFRS) and inter- the disclosures to be made when the recoverable amount is shown as the 13 pretations of the International Financial Reporting Interpretations Commit- fair value less selling expenses. The amended standard has no effect on tee (IFRIC). In addition, the Group applies the Swedish Financial Reporting Boliden’s financial reporting. 14 Board’s recommendation RFR 1 “Supplementary accounting regulations IFRIC 21, Levies: Guidance on when to recognise a liability for levies for corporate conglomerates” specifying the supplements to IFRS required such as taxes or charges accounted for in accordance with IAS 37 (with the 15 pursuant to the stipulations of the Swedish Annual Accounts Act. exception of income taxes, fines, and other penalties). The clarification The Parent Company’s functional currency is the Swedish krona (SEK) means that a liability shall be recognised when an undertaking exists to pay a 16 and this is also the reporting currency for both the Group and the Parent levy of this kind as a result of a certain event. If the event is ongoing, the lia- Company. All amounts in the financial reports are stated in millions of bility shall be recognised progressively. The standard is not applicable until 17 Swedish kronor (SEK m) unless otherwise specified. the next financial year. It only affects the accounting if an event of the kind Items have been valued at their acquisition value in the consolidated described above would not have been recognised as a liability under current 18 accounts, with the exception of certain financial assets and liabilities regulations, which is only adjudged to be the case in exceptional cases. (derivative instruments), which have been valued at their fair value, and 19 inventories in those cases where they are hedged at fair value. New standards and interpretations that come into The Parent Company’s accounting principles follow those of the Group force in the 2015 calendar year or thereafter 20 with the exception of the mandatory regulations stipulated in the Swedish IFRS 9, Financial instruments: The standard comes into force for financial Financial Reporting Board’s recommendation, RFR 2 “Accounting for legal years beginning in 2018 or thereafter and replaces IAS 39. It is divided into 21 entities”. The Parent Company’s accounting principles are specified under three sections: classification, hedge accounting and impairment. The the heading, “The Parent Company’s accounting principles”. standard requires the classification of financial assets in accordance with 22 The most important accounting principles that have been applied are three valuation categories, namely amortised cost, fair value through other described below. These principles have been applied consistently for all comprehensive income, or fair value through the Income Statement. The 23 years presented, unless otherwise specified. classification is determined when the asset is first accounted for on the The Annual Report was approved for publication by the Board of Direc- basis of the characteristics of the financial asset and the company’s business 24 tors on 11th February 2015. The Balance Sheets and Income Statements model. No major changes apply with regard to financial liabilities. are subject to approval by the Annual General Meeting on 5th May 2015. IFRS 9 also includes augmented regulations regarding disclosures in rela- 25 tion to risk management and the effects of hedge accounting. The standard New or amended standards and interpretations from has been complemented with regulations governing the impairment of 26 IASB and IFRIC pronouncements that came into force financial assets, where the model is based on anticipated losses. An overall in the 2014 calendar year assessment of the effects on Boliden’s accounting will be made at a later date. 27 IFRS 10 Consolidated Financial Statements. Entails the introduction of a IFRS 15, Revenue from Contracts with Customers: The standard 28 single model for determining whether a controlling influence exists for all of comes into force on 1st January 2017 and replaces existing standards and a company’s investments, including so-called SPE (Special Purpose Entities). interpretations on revenues. The standard introduces a new revenue recog­ 29 A controlling influence exists if the investor 1) is exposed to or is entitled to nition model for contracts with customers and shall be applied to all variable returns from the investment, 2) has the ability to affect the return ­contracts with customers with the exception of insurance contracts, finan- 30 through its power over the investee, and/or 3) there is a link between the cial instruments and leasing contracts in that separate standards exist in return received and the power over the investee. The standard does not entail these areas. The new standard also entails new starting points for when 31 any change with regard to the companies included in the Boliden Group. revenue shall be recognised and requires new evaluations by the company IFRS 11 Joint arrangements. Divides existing joint ventures into joint management that differ from those currently applied. operations – the owners are entitled to assets and undertakings for liabili- The principal areas in which existing regulations differ from the ties in the investment – or joint ventures – the owners are entitled to the new ones are: net assets of the investment. The proportional method shall be used for – Control-based model for determining when revenue shall be recognised joint operations while, for joint ventures, the equity method shall be used. (transfer of risks and benefits is only retained to indicate that control The standard entails no change with regard to the consolidation method may have been transferred). applied for Boliden. – The valuation of the revenue shall be based on what the vendor expects IFRS 12 Disclosures of Interest in Other Entities. This standard brings to receive, rather than on fair value. together disclosure requirements regarding unconsolidated subsidiary – New rules governing the way in which a contract’s goods and services companies, joint arrangements and associated companies in a single stand- shall be distinguished in the financial reporting. ard. The standard does not entail any augmented disclosure requirements – Revised criteria governing how revenue shall be recognised over time. for the Group. – Expenditure for the acquisition and fulfilment of contracts. No other amendments to standards and interpretations that have come – Significantly augmented disclosure requirements. into force have had any effect on Boliden’s financial reporting. Boliden will probably not be affected to any substantial degree by IFRS 15.

BOLIDEN ANNUAL REPORT 2014 71 FINANCIAL REPORTING | Notes

01 Note 01 Significant accounting and valuation principles, cont.

02 The standards and interpretations presented are those that may, in the Boliden’s assessment of the size of the mineral reserves affects annual opinion of the Group, have an effect in future. The Group intends to depreciation costs and impairment tests. 03 implement these standards when they become applicable. Consolidated Statements 04 Estimates and assessments The Consolidated Statements cover the Parent Company and all compa- In order to compile the Financial Statements in accordance with IFRS nies over which the Parent Company through ownership, directly or indi- 05 accounting principles, assessments and assumptions must be made that rectly, exercises a controlling influence. The term “controlling influence” 06 impact the reported asset and liability amounts and the income and refers to companies in which Boliden has the right to formulate financial expense amounts, as well as other information provided in the Financial and operational strategies. This is generally achieved by ensuring that its 07 Statements. The estimates and assessments of the Board of Directors and ownership share, and the share of votes, exceeds 50 per cent. The existence the company’s management are based on historical experience and forecast and effect of potential voting rights that can currently be utilised or con- 08 future trends. The actual outcome may differ from these assessments. verted are taken into account when assessing whether the Group is capa- ble of exercising a controlling influence over another company. Subsidiar- 09 Valuation of inventories ies are included in the Consolidated Statements as of the point in time at It is not easy, in the smelters’ process inventories and stocks of finished which a controlling influence was attained, while companies that have 10 metals, to differentiate between externally purchased material and mined been sold are included in the Consolidated Statements up to the time concentrate from the Group’s own operations. Assessments of the inter- when the sale occurred, i.e. up to the point in time when controlling 11 nally supplied percentage of process inventories and the stocks of finished influence ceased to be exercised. metals are, therefore, carried out with the aid of an historically based The Consolidated Statements have been compiled in accordance with 12 breakdown of the raw materials feed. the acquisition accounting method, which means that the acquisition value of a company comprises the fair value of the payment made (includ- 13 Pension undertakings ing the fair value of any assets, liabilities and own equity instruments Pension provisions are dependent on the assumptions made in conjunction issued). The identifiable assets, liabilities and contingent liabilities acquired 14 with the calculations of the amounts. The assumptions refer to discount are reported at their fair value on the acquisition date. A determination of interest rates, rate of salary increases, future increases in pensions, the num- whether a holding without a controlling influence shall be reported at fair 15 ber of remaining working years for employees, life expectancy, inflation and value or at the holding’s proportional share of the acquired company’s net other factors, and are reviewed annually. The assumptions are made for every assets is conducted in conjunction with every acquisition. When required, 16 country in which Boliden has defined benefit pension plans. The most sig- the subsidiaries’ accounts are adjusted to ensure that they follow the same nificant assumptions, in Boliden’s opinion, are with regard to the discount principles applied by other Group companies. All internal transactions 17 rate, the rate of salary increases, and life expectancy, and Boliden has elected between Group companies and intra-Group transactions are eliminated to present sensitivity analyses for these factors. Boliden’s assumptions and when the Consolidated Statements are compiled. 18 sensitivity analyses are presented in Note 23 on pages 88–91. Associated companies 19 Legal disputes Shareholdings in associated companies, in which the Group has a minimum Boliden regularly reviews outstanding legal disputes using internal com- of 20 per cent and a maximum of 50 per cent of the votes, or otherwise has a 20 pany legal counsel and, when necessary, with the help of external advisors, significant influence over operational and financial management, are in order to assess the need for provisions to be made. See Note 30, reported in accordance with the equity method. Under the equity method, 21 Pledged assets and contingent liabilities, on page 95. the consolidated book value of the shares in the associated companies corre- sponds to the Group’s share of the associated companies’ shareholders’ equity 22 Reclamation costs and any residual value from the consolidated surplus values. Shares in associ- Provisions for reclamations are made on the basis of an assessment of future ated companies’ profits/losses are reported in the Consolidated Income State- 23 costs based on current conditions. Provisions are reviewed regularly by inter- ment as part of the operating profit and comprise the Group’s share in the nal or external specialists and updates made when necessary when the esti- associated companies’ net profits/losses. Shares in profits accumulated after 24 mated useful lives, costs, technical preconditions, regulations or other condi- the acquisition of associated companies but not yet realised through divi- tions of mine and smelter assets change. Boliden also continuously reviews dends constitute part of the Group’s equity. 25 requirements with regard to closed down mines. See Note 13, Tangible fixed assets, on pages 83−84 and Note 24, Other provisions, on page 91. Conversion of foreign subsidiaries and other 26 overseas operations Valuation of fixed assets The currency in the primary economic environments in which the subsid- 27 Impairment tests for tangible and intangible assets are based on the com- iary companies operate is the functional currency. The current method is pany’s internal business plan and on assumptions with regard to future applied in the conversion of Income Statements and Balance Sheets to the 28 trends in metal prices, treatment and refining charges, and exchange rates, Group’s reporting currency. Under the current method, all assets, provi- sions and liabilities are converted at the rate of exchange applying on the 29 amongst other things. Changes in market prices of metals, treatment and refining charges and currencies have a substantial effect on the company’s closing day, while all items in the Income Statement are converted at the 30 future cash flows and hence on the estimated write-down requirement. average exchange rate. Any exchange rate differences arising and accumu- Assumptions with regard to price trends for metals, treatment and refin- lated translation differences in respect of the conversion of subsidiaries are 31 ing charges and currencies are made by the company management with reported as Other comprehensive income. the help of external experts. The assumptions are reviewed on an annual Boliden hedges its net investments in foreign subsidiaries by taking an basis and adjusted when necessary. For further information, see Note 13, opposite position (in the form of loans or currency futures) in the relevant Tangible fixed assets, on pages 83−84. foreign currency. Exchange rate differences on hedging measures are The depreciation period for deferred mining costs, installations and reported as Other comprehensive income. equipment in mines depend on future ore extraction and the lifespan of In conjunction with the sale of overseas operations whose functional cur- the mine. The assessment of these aspects is, in turn, heavily dependent rency is different from the Group’s reporting currency, the accumulated trans- on mineral reserves and, consequently, on factors such as anticipated lation differences attributable to the operations are realised in the Consoli- future metal prices. Changes to conditions may entail changes to the rate dated Income Statement, after deductions for any currency hedging activities. of depreciation applied in future. Business Area Mines draws up annual production plans for the mines’ lifespans. Financial instruments The following financial instruments, i.e. financial assets and liabilities, are Mineral reserves recognised in the Balance Sheet: shares, receivables, liquid assets, liabilities Boliden’s mineral reserves are divided into two categories, namely proba- and derivatives. ble and proven. The assessment is based on geological measurements and Financial instruments are recognised in the Balance Sheet when the assumptions that are explained in greater detail on pages 109−112. company becomes bound by the instrument’s contractual terms (the eco-

72 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

01 nomic approach). Liabilities to credit institutions are, however, not cash and bank balances, short-term investments with a maximum term of 02 reported until the settlement date. Financial assets are removed from the three months at the time of acquisition and which can easily be converted 03 Balance Sheet when the rights entailed by the agreement are utilised, to cash. Liquid assets are only exposed to an insignificant risk of fluctua- mature or are transferred to another counterparty. Financial liabilities are tions in value and are reported at the accrued acquisition value. Receivables 04 removed from the Balance Sheet when the agreement’s obligations are ful- are defined as accounts receivable and interest-bearing short-term holdings filled or if significant aspects of the loan terms are renegotiated. of securities or other investments which are not classified as fixed assets and 05 Financial instruments are reported at the fair value or accrued acquisi- which are not attributable to liquid assets. Receivables are reported in the tion value, depending on the initial categorisation under IAS 39. On each anticipated recoverable amount, i.e. after deductions for bad debts, which 06 reporting occasion, the Group performs an impairment test to determine are assessed on an individual basis. The anticipated term of accounts receiv- whether objective indications exist of the need to write down a financial able and other current receivables is short and the value is, therefore, 07 asset or group of assets. reported at the nominal amount without discounting in accordance with the accrued acquisition value method. 08 Valuation principles Fair value Financial assets available for sale 09 The fair value of derivatives is based on listed bid and ask prices on the clos- Assets in this category comprise shares valued at fair value with changes in ing day and on a discounting of estimated cash flows, and includes risk value recognised under Other comprehensive income. If it is not possible 10 assumptions. Market prices for metals are taken from the trading locations to establish the fair value of such shares, they are reported at their acquisi- of metal derivatives, i.e. the London Metal Exchange (LME) and the Lon- tion value, taking into account accumulated write-downs. 11 don Bullion Market Association (LBMA). Discount rates are based on cur- rent market rates per currency and time to maturity for the financial Derivatives used in hedge accounting 12 instrument. Exchange rates are obtained from the Riksbank. This category comprises derivatives valued at fair value and which form When presenting the fair value of liabilities to credit institutions, the fair part of fair value hedging, cash flow hedging, and the hedging of net 13 value is calculated as discounted agreed amortisations and interest payments investments in overseas operations. The derivatives comprise metals at estimated market interest rate levels. The fair value of accounts receivable futures, currency futures, and interest derivatives. See Note 27 on pages 14 and accounts payable is deemed to be the same as the reported value due to 92–93 for details of derivatives used for hedging purposes. the short term to maturity, to the fact that provisions are made for bad 15 debts, and to the fact that any penalty interest incurred will be debited. Other financial liabilities If changes in value cannot be determined for financial assets or liabili- Financial liabilities primarily comprise liabilities to credit institutions and 16 ties reported at fair value, they are reported at the acquisition values of the accounts payable. The anticipated term of accounts payable is short and instruments at their time of acquisition, which corresponds to the fair the value is, consequently, reported at a nominal amount in accordance 17 value at the time of acquisition plus transaction costs. with the accrued acquisition value method. Liabilities to credit institu- Boliden provides information on all financial assets and liabilities tions are initially valued at amounts received, less any set-up fees, and are 18 reported at fair value in the Balance Sheet on the basis of a three-level fair then valued at the accrued acquisition value. Interest expenses are value hierarchy. Level one comprises instruments that are listed and traded reported on a rolling basis in the Income Statement with the exception of 19 on an active market where identical instruments are traded. Level two com- the part included in the acquisition value for tangible fixed assets. Capital- prises instruments that are not traded on an active market, but where ised set-up fees are reported directly against the loan liability to the extent 20 observable market data is used for valuation of the instrument (either that the loan agreement’s underlying loan guarantee has been utilised, and directly or indirectly). Level three comprises instruments where the valua- are periodised in the Income Statement under Other financial expenses 21 tion is, to a considerable extent, based on unobservable market data. over the contractual term of the loan. If a loan agreement is terminated or The assessments have been conducted on the basis of the circumstances otherwise ceases to obtain at a point in time prior to the end of the origi- 22 and factors obtaining with regard to the various instruments. Metal futures nal contractual term, capitalised set-up fees are taken up as income. If a are classified as level two, in that the discounted prices are based on listed current agreement is renegotiated during the contractual term, any addi- 23 daily prices from the exchanges. Currency futures and interest swaps have tional fees in connection with the renegotiation are periodised over the also been classified as level two, with reference to the fact that the valuation remaining contractual term of the loans. 24 is based on observable market data. The fair value of liabilities to credit institutions has been classified as level two. Shares and participations that Assets and liabilities in foreign currencies 25 are not listed have been classified as level three. Exceptions to classification Receivables, liabilities and derivatives in foreign currencies are converted 26 on the basis of the fair value hierarchy are made for accounts receivable, to Swedish kronor at the exchange rate applying on the closing day. liquid assets and accounts payable where the reported value is deemed to Exchange rate differences on operating receivables and operating liabili- 27 constitute a reasonable estimation of the fair value. ties are included in the operating profit, while exchange rate differences on financial assets and liabilities, including any profit/loss, are reported 28 Amortised cost under financial items. Exchange rate effects on financial instruments used Amortised cost (accrued acquisition cost) is calculated using the effective in cash flow hedging and the hedging of net investments in overseas oper- 29 interest rate method. This means that any premiums or discounts, as well ations, are reported under Other comprehensive income with the excep- as expenses or income directly attributable to them, are distributed over tion of any exchange rate differences on currency swaps in foreign curren- 30 the duration of the contract with the aid of the estimated effective interest cies reported under net financial items. rate. The effective interest rate is the rate that yields the instrument’s acqui- 31 sition value as a result in conjunction with current value calculation of Classification and reporting of derivatives used for future cash flows. hedging purposes See also “Risk management” in the Directors’ Report on pages 49–51. Valuation category Boliden divides financial instruments into the following valuation catego- Fair value hedging (binding undertaking) ries. See also Note 29 on page 94. Changes in the value of financial derivatives used to hedge a binding undertaking are reported under the operating profit together with Holdings valued at fair value changes in the value of the asset or liability that the hedging is designed Derivatives valued at fair value and for which changes in value are to counter. The fair value of the derivatives is reported in the Balance reported under net financial items. The derivatives comprise currency Sheet as other assets and liabilities. Parts of inventories constitute bind- futures and are not included in hedge accounting. ing undertakings and are reported at market value as inventory value, and changes in the value of derivatives consequently effectively match Loans and accounts receivable the changes in value from hedged items in the Income Statement and This category includes financial investments, receivables not listed on an Balance Sheet. active market, and liquid assets. Liquid assets are defined as, in addition to

BOLIDEN ANNUAL REPORT 2014 73 FINANCIAL REPORTING | Notes

01 Note 01 Significant accounting and valuation principles, cont.

02 Cash flow hedging (forecast flows) costs, the governing principles of which are described under the Tangible Hedge accounting is applied to financial derivatives that refer to the fixed assets heading. Exploration rights acquired in conjunction with 03 hedging of forecast flows, which means that the effective share of the operational acquisitions, have been capitalised as intangible assets. 04 unrealised market values is reported under Other comprehensive income up to the point in time when the hedged item, such as forecast metal Intangible fixed assets 05 sales, US dollar income, and interest expenses, is realised and thus Intangible fixed assets include patents, licenses, similar rights, emission reported in the Income Statement. Realised profits/losses attributable to rights, exploration rights acquired in conjunction with operational 06 metal and currency deriva­tives are reported under net sales, while the acquisitions and goodwill, which are booked at their acquisition value profit/loss on interest derivatives is reported under net financial items. less amortisation and any write-downs. Goodwill comprises the amount 07 Individual interest swaps and multiple interest swaps – known as portfolio by which the acquisition value exceeds the fair value of the Group’s share hedging – are both used to hedge future interest payments. Any ineffec- of the identifiable net assets of the subsidiary company acquired as well 08 tive part of cash flow hedging is reported under net financial items. as any contingent liabilities at the time of acquisition. Goodwill is reported in the Balance Sheet at the value given in conjunction with the 09 Hedging of net investments acquisition, converted, where relevant, at the closing day rate, after Hedge accounting is applied to the profit/loss on hedging in respect of net deduction for accumulated write-downs. Calculations of the profit or 10 investments in overseas operations and to cash flow hedging under Other loss on the sale of a unit include any remaining reported goodwill value comprehensive income. Any ineffective component of these hedges is ascribed to the operations sold. 11 reported under net financial items. Associated hedging results are, in con- Goodwill has been assessed as having an indefinite useful life. Goodwill junction with the sale of overseas operations, reported in the Income State- is allocated to the smallest possible unit or group of units that generate 12 ment, together with the translation effect of the net investment. cash where separate cash flows can be identified, and an impairment test is performed on the reported value at least once a year to determine whether 13 Offsetting financial assets against liabilities there is any need for a write-down. Such impairment tests are, however, The offsetting of financial assets and liabilities is regulated by ISDA performed more frequently if there are indications that the value may 14 (International Swaps and Derivatives Association) agreements, which have fallen during the year. regulate both offsetting between contracted counterparties as part of Other intangible fixed assets, with the exception of emission rights, are 15 operating activities and in conjunction with circumstances relating to amortised over their anticipated useful lives. breach of contract or early termination. In its operating activities, 16 Boliden offsets payments on undertakings with the same maturity date, Emission rights which are in the same currency, which have the same counterparty, and The Boliden Group participates in the European system for emission 17 which are for the same type of instrument. Surplus amounts per instru- rights. Rights are allocated across the European market. One emission ment and currency only are paid by the party with the biggest outstand- right grants entitlement to emit the equivalent of one tonne of carbon 18 ing liability. All terminated undertakings comprised by ISDA agree- dioxide or similar gas and is classified as an intangible asset. Emission ments are, in conjunction with breach of contract or early termination, rights allocated are valued at the acquisition price of zero, while rights 19 which may be caused by circumstances not directly linked to neglect by acquired are valued at the purchase price. An intangible asset and a provi- any party, offset in a sum that is paid by the party with the biggest out- sion in the corresponding amount are reported during the current year in 20 standing liability. the event of any need arising to purchase additional emission rights. The asset is amortised over the remaining months of the year, thereby distrib- 21 Government contributions and support uting the cost in parallel with production. The intangible fixed asset is Government support refers to subsidies, grants or premiums designed to thereby exhausted and the provision for emissions made is settled. If the 22 ­provide an economic benefit, or Government support in the form of transfers liability to deliver emission rights exceeds the remaining emission rights of resources to the company that may be applied to an undertaking. Govern- allocation, the liability is revalued at the market value of the number of 23 ment support attributable to assets is reported either by recognising the emission rights required to clear the undertaking on the closing day. ­support as a prepaid income or by reducing the reported value of the asset. 24 Tangible fixed assets Revenue recognition Land, plants and equipment, and capitalised costs associated therewith 25 Sales of metal concentrates, metals and by-products are reported at the for development, pre-production measures and future reclamation costs, time of delivery to the customer in accordance with the terms and condi- are booked at the acquisition value less depreciations and any write- 26 tions of sale, that is to say revenue is recognised whenever significant downs. Interest expenses attributable to financing development and com- rights and obligations associated with the title transfer to the purchaser. pletion of significant tangible fixed assets are included in the acquisition 27 These sales are reported net after VAT, discounts and exchange rate differ- value. Repair and maintenance expenses are booked as costs, while sub- stantial improvements and replacements are capitalised. Estimated future 28 ences when sales are made in foreign currencies. Preliminary invoices are issued for the Group’s metal concentrates at expenses for the dismantling and removal of a tangible asset and the resto- ration of a site or area where the tangible asset is located (reclamation 29 the time of delivery. Definitive invoices are issued when all component parameters (concentrate quantity, metal content, impurity content, and costs) are capitalised. Capitalised amounts comprise estimated expenses, 30 the metal price for the agreed pricing period – normally the average price calculated at current value, which are simultaneously reported as provi- on the LME in the month after delivery) have been established. sions. Effects of subsequent events that result in costs that exceed the pro- 31 The Group’s metals are invoiced to the customers at the time of deliv- vision are discounted, capitalised as a fixed asset, and increase the provi- ery. The Group eliminates the price risk in conjunction with the sale and sions, and are written off over the remaining life of the asset. purchase of metals by hedging the imbalance between quantities pur- Deferred mining costs at mines comprise the waste rock excavation chased and sold on a daily basis. The smelters’ income comprises treat- required to access the ore body, work relating to infrastructural facilities, ment and refining charges (TC/RC), free metals, compensation for impu- roads, tunnels, shafts and inclined drifts, as well as service, electricity and rities in the raw materials, and the worth of by-products. air distribution facilities. Deferred mining costs arising from capacity Income from activities outside the sphere of the regular operations is expansion of the mining operation, the development of new ore bodies, reported as Other operating income. and the preparation of mining areas for future ore production are capital- ised. Mining costs arising from waste rock removal from open-pit mines Exploration, research and development are capitalised as part of an asset when it becomes possible to identify the Boliden’s R&D primarily comprises exploration. Boliden is also involved, part of an ore body to which access has been improved. to a limited extent, in developing mining and smelting processes. Expenses associated with research and development are primarily booked Depreciation principles for tangible fixed assets as costs when they arise. When the financial potential for the exploitation Depreciation according to plan is based on the original capitalised values of a mine deposit has been confirmed, the expenses are booked as costs up and the estimated economic lifespan. Depreciation of an asset begins to that date. After that date, the expenses are capitalised as deferred mining when an asset becomes operational, i.e. when it is on site and in the con-

74 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

01 dition required for use in the manner intended by the company manage- asset is depreciated according to the same principles as those that apply 02 ment. Fixed assets and capitalised values attributable to waste rock are to other assets of the same type. 03 depreciated per push-back and in conjunction with ore extraction in rela- The leasing charges for operational leasing agreements are booked as tion to the anticipated ore extraction for the entire push-back. Fixed assets costs on a linear basis over the leasing period. 04 and capitalised values included in deferred mining costs are depreciated in accordance with a production-based depreciation method that is based on Inventories 05 the proven and probable mineral reserves in the respective ore bodies. The Group’s inventories primarily comprise mined concentrates, materials Depreciation is effected to the estimated residual value. Estimated resid- tied up in the smelters’ production processes, and finished metals. Invento- 06 ual values and production capacity are subject to ongoing review. Fixed ries are valued at whichever is the lower of the acquisition value in accord- assets not directly linked to production capacity are depreciated on the ance with the first-in-first-out principle and the net sale value, taking into 07 basis of their anticipated useful lives. account the risk of obsolescence. The acquisition value of inventories of Smelters and production plants are depreciated linearly over their metals from the company’s mines and semi-finished and finished products 08 anticipated useful lives. manufactured in house comprises the direct manufacturing costs plus a surcharge for indirect manufacturing costs. Supplies inventories are valued 09 The following depreciation periods are applied to tangible fixed assets at whichever is the lower of the average acquisition value and the replace- including future reclamation costs: ment value. When mined concentrates are bought in from external sources 10 Buildings 20–50 years and definitive pricing has not yet occurred, the acquisition value is esti- Land improvements 20 years mated at the closing day price. Fair value hedging is effected in conjunc- 11 Deferred mining costs and waste rock capitalisation Concurrently tion with the definitive pricing of mined concentrates. The change in the with ore depletion value of hedged items in the inventory value is also reported in conjunc- 12 Capitalised restoration costs Linearly over the tion with fair value hedging of mined concentrates. anticipated lifespan 13 Processing facilities 10–25 years Taxes Machinery 3–10 years The tax expense for the period (income) comprises current tax and 14 Equipment, tools, fixtures and fittings 3–10 years deferred tax. Taxes are reported in the Consolidated Income Statement under Other comprehensive income and in shareholders’ equity. 15 Boliden applies component depreciation, which means that larger pro- Current tax is the tax calculated on the taxable profit/loss for each cessing facilities are broken down into component parts with different period. The year’s taxable profit/loss differs from the year’s reported profit/ 16 useful lives and thus different depreciation periods. loss before tax in that it has been adjusted for non-taxable and non- deductible items and temporary differences. The Group’s current tax 17 Write-downs ­liability is calculated in accordance with the taxation rates stipulated or On each reporting occasion, an assessment is performed to determine announced on the closing day. 18 whether there is any indication that the value of the Group’s assets has Deferred tax is reported using the Balance Sheet method, under which depreciated or been impaired. Should this be the case, a calculation is per- deferred tax liabilities are reported in the Balance Sheet for all taxable 19 formed of the recoverable amount of the asset in question. Goodwill is, temporary differences between reported and fiscal values of assets and together with any intangible assets with an indefinable useful life, subject ­liabilities. Deferred tax receivables are reported in the Balance Sheet in 20 to annual impairment tests even if there are no indications of a reduction respect of loss carry-forwards and all deductible temporary differences to in its value. Impairment tests are, however, performed more frequently if the extent that it is likely that these amounts can be used to offset future 21 indications exist of a decline in value. The recoverable amount comprises taxable surpluses. The reported value of deferred tax receivables is whichever is the higher of the value in use of the asset in the operations checked at the end of each accounting period and reduced to the extent 22 and the value that would result if the asset were sold to an independent that it is no longer likely that sufficient taxable surpluses will be available party, fair value minus selling expenses. The value in use comprises the for its use. Deferred tax is calculated in accordance with the taxation 23 present value of all incoming and outgoing payments attributable to the rates that are expected to apply to the period in which the asset is recov- asset for the duration of its expected use in the operations, plus the pre- ered or the liability settled. 24 sent value of the net sales value at the end of the asset’s useful life. If the Both deferred and current tax receivables and tax liabilities are offset estimated recoverable amount is lower than the book value, the latter is when they relate to income tax levied by the same tax authority. 25 written down to the former. Write-downs are reported in the Income Statement. Any write-downs Provisions 26 are reversed if changes in the assumptions leading to the original write- Provisions are reported when the Group has, or may be considered to 27 down mean that the write-down is no longer warranted. Write-downs have an obligation as a result of events that have occurred and it is likely that have been performed are not reversed in such a way that the reported that disbursements will be required in order to fulfil this obligation. A fur- 28 value exceeds the amount that would, following deductions for deprecia- ther prerequisite is that it should be possible to make a reliable estimate of tion according to plan, have been reported if no-write down had been the amount to be paid. 29 performed. Reversals of write-downs performed are reported in the When a significant effect arises due to the point in time at which a pro- Income Statement. Goodwill write-downs are not reversed. See also the vision is made, the provision is valued at the present value of the amount 30 section on Valuation of fixed assets. estimated to be required to fulfil the obligation. A discount interest rate before tax that reflects current market evaluations of the time value of 31 Leasing money and the risks associated with the provision is applied in conjunc- A financial leasing agreement is an agreement whereby the financial risks and tion herewith. The increase that is due to time passing is reported as an benefits associated with a title are, in all significant respects, transferred from interest expense. Provisions are broken down into short-term and long- the lessor to the lessee. Leasing agreements that are not classified as financial term provisions. leasing agreements are classified as operational leasing agreements. Boliden’s provisions primarily, with the exception of pensions (see separate Assets held in accordance with financial leasing agreements are reported section), refer to reclamation costs that are expected to arise when operations initially as fixed assets in the Consolidated Balance Sheet at whichever is are decommissioned. Provisions are also made for any purchases of emissions the lower of the market value of the assets or the present value of the future rights and for any remuneration payable in conjunction with the termination lease payments. The Group’s liability in relation to the lessor is reported in of employment that may be payable to employees to whom a commitment of the Balance Sheet under the heading of Liabilities to credit institutions, termination has been given or to employees who accept voluntary redun- broken down into short- and long-term components. dancy. The Group reports a provision and a cost in conjunction with termi- Lease payments are broken down into interest and amortisation of the nation when Boliden is obligated either to give the employee notice prior to liability. The interest is distributed over the leasing period so that an the normal point in time for employment cessation, or to provide remunera- amount corresponding to the fixed interest amount payable on the liabil- tion with a view to encouraging early retirement. ity reported in each period is charged to each reporting period. The leased

BOLIDEN ANNUAL REPORT 2014 75 FINANCIAL REPORTING | Notes

01 Note 01 Significant accounting and valuation principles, cont.

02 Contingent liabilities Kylylahti produces concentrate that contains copper, gold, zinc and silver. A contingent liability is a potential undertaking that derives from events Business Area Mines is also responsible for sales of mined concentrates. 03 which have occurred and whose incidence is only confirmed by one or Business Area Smelters comprises the Kokkola and Odda zinc smelters, the Rönnskär and Harjavalta copper smelters, and the Bergsöe lead 04 more uncertain future events. A contingent liability can also be an exist- ing undertaking that has not been reported in the Balance Sheet because smelter. The Business Area is responsible for all sales of the smelters’ prod- ucts and handles all raw material flows between the Group’s mines, smelt- 05 it is unlikely that an outflow of resources will be required or because the size of the undertaking cannot be calculated. See Note 30 on page 95. ers and customers. This includes responsibility for purchases of metal con- 06 centrates and recycling materials from external suppliers. The zinc smelt- Employee benefits ers’ production primarily comprises zinc metal, but also includes silver 07 Pension undertakings concentrate, aluminium fluoride and sulphuric acid. The copper smelters’ The Group’s companies have a variety of pension systems in accordance production primarily comprises copper, gold, silver, lead and sulphuric 08 with local conditions and practices in the countries in which they operate. acid. The copper smelters also recycle metal and electronic scrap and smelt They are generally financed through payments made to insurance com­ nickel. The Bergsöe lead smelter recycles lead metal, mainly from scrap 09 panies or through the company’s own provisions which are determined car batteries. through periodic actuarial calculations. The Group’s provisions for Transactions between the Business Areas, primarily involving metal 10 ­pension undertakings are calculated in accordance with IAS 19, concentrates, are settled on an arms’ length basis. Employee benefits. Group staff functions and Group-wide functions that are not assigned to 11 For pension systems where the employer is committed to defined con- Smelters or Mines are reported under the heading Other. Items where the tribution systems, the undertaking in relation to the employee ceases accounting method differs between the Business Areas and the Group are 12 when the agreed premiums have been paid. Premiums paid are booked reported under the heading Accounting principles. The market valuation of as costs on an ongoing basis. financial derivative instruments used to manage currency risks, metal price 13 The undertaking does not cease for pension systems where a defined risks and interest risks are, for example, reported under Accounting princi- benefit pension has been contractually agreed, until the agreed pensions ples until such time as the underlying flows are reflected in the Income State- 14 have been paid out. Boliden commissions independent actuaries to calcu- ment and distributed between the respective segments. late pension undertakings relating to the defined benefit pension plan Note 2 contains details of revenues per segment and geographical mar- 15 arrangements in each country. For information on calculation parame- ket, showing the location of external customers, and providing informa- ters, see the section entitled “Estimates and assessments − pension under- tion on major customers. Assets and investments per geographical market 16 takings” and Note 23 on pages 88−91. are also reported there. Revaluations of the defined benefit net pension liability, such as actuar- 17 ial profits and/or losses and the difference between the return on plan The Parent Company’s accounting principles assets and the discount rate, are reported under Other comprehensive The Parent Company’s annual accounts are compiled in accordance with 18 income. The financing cost of the net pension liability is calculated using the Swedish Annual Accounts Act, the Swedish Financial Reporting the discount rate for the pension liability. The financing cost, the cost Board’s recommendation, RFR2, Accounting for legal entities, and the 19 of service during the current period and any previous periods, losses statements issued by the Swedish Financial Reporting Board. Under from settlements and costs in connection with special payroll tax are all RFR2, the Parent Company shall, in the accounts for the legal entity, 20 reported in the Income Statement. Special payroll tax is regarded as part apply all EU-approved International Financial Reporting Standards of the total net pension liability. (IFRS) and statements to the extent that this is possible within the frame- 21 work of the Swedish Annual Accounts Act and while taking into account Share capital the connection between reporting and taxation. The recommendation 22 Ordinary shares are classified as share capital. Transaction costs in con- specifies the exceptions and additions to be made in relation to IFRS. junction with a new share issue are reported as a net amount after tax for The differences between the Group’s and the Parent Company’s account- 23 deduction from the issue proceeds received. ing principles are described below.

24 Buy-back of own shares Reporting Group contributions and shareholders’ Boliden’s holdings of its own shares are reported as a reduction in share- contributions 25 holders’ equity. Transaction costs are reported directly against sharehold- Group contributions received or made are reported as appropriations. ers’ equity. Shareholders’ contributions are booked directly against non-restricted 26 equity by the recipient and as an increase in the Participations in Group Dividend companies item by the contributor. 27 A dividend payment proposed by the Board of Directors does not reduce Anticipated dividends 28 the shareholders’ equity until it has been approved by the Annual General Meeting. Anticipated dividends can be reported in those cases where the Parent Company has the sole right to determine the size of the dividend and has 29 Information per segment and geographical market ensured that the dividend does not exceed the subsidiary company’s divi- 30 Boliden’s operations are organised into two segments: Business Area dend payment capacity. Smelters and Business Area Mines. The Business Areas correspond to Financial instruments 31 Boliden’s operating segments in that 1) the Business Area Managers are directly responsible to the CEO, 2) the CEO controls the Group’s com- Financial instruments are not valued in the Parent Company in accord- ponent parts via two “Business Area Boards”, one for each Business Area, ance with IAS 39. The valuation is conducted on the basis of the acquisi- through which the financial results in relation to financial goals are evalu- tion value (see the Group’s accounting principles). ated, 3) financial goals and investment plans and overhead budgets for the respective Business Areas are set in the business plan and budget process, Subsidiaries 4) decisions on goals and resource allocation for units within the respec- Participations in subsidiary companies are reported in the Parent Com- tive Business Areas are made within the respective Business Areas’ man- pany in accordance with the acquisition value method. Transaction agement groups, and 5) heads of operating units report not to the CEO expenses in conjunction with the acquisition of subsidiaries are reported but to the Business Area Managers. as costs in the consolidated accounts, while in the Parent Company, they Business Area Mines comprises the operations of the Swedish mines, are reported as part of the acquisition value. Aitik, the Boliden Area and Garpenberg, the Tara mine in Ireland and, as Determination of the value of subsidiary companies is effected when of the fourth quarter of 2014, the Kylylahti mine in Finland. Aitik pro- there are indications of a decline in value. duces copper concentrate with some gold and silver content. The other Swedish mines produce zinc, copper and lead concentrates with variable gold and silver content. Tara produces zinc and lead concentrates and

76 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Note 02 Information per segment and geographical market 01

For additional information, please refer to “General accounting principles” for segment reporting on page 78. 02

Segment – Business Areas 03

Accounting 04 31-12-2014 Mines Smelters Other ­principles2) Eliminations The Group External revenues 920 35,924 0 – – 36,844 05 Effect on profit of metal price and currency hedging 47 – – – – 47 Internal revenues 8,351 –30 84 – –8,405 0 06 Revenues 9,318 35,894 84 – –8,405 36,891 Results from participations in associated companies 2 1 – – – 3 07 Operating profit 1,299 1,672 –147 – –65 2,759 08 Net financial items –287 Profit after financial items 2,471 09 Taxes –572 Net profit for the year 1,899 10

Intangible fixed assets 408 3,107 0 – – 3,516 11 Tangible fixed assets 20,259 8,273 91 – – 28,623 Equity shares and other financial fixed assets 7 10 29 – – 45 12 Inventories 766 7,286 – – –167 7,885 Other receivables 1,081 1,872 404 291 –829 2,820 13 Assets in capital employed 22,521 20,548 524 291 –996 42,888 14 Provisions, other than for pensions and tax 1,559 502 58 – – 2,119 Other liabilities 1,347 4,454 724 – –843 5,682 15 Liabilities in capital employed 2,906 4,956 782 – –843 7,801 Total capital employed 19,615 15,592 –258 291 –153 35,087 16 Depreciation 2,264 1,012 0 – – 3,277 17 Investments1) 3,450 768 4 – – 4,222

18

Accounting 19 31-12-2013 Mines Smelters Other ­principles2) Eliminations The Group External revenues 834 33,347 0 – – 34,181 20 Effect on profit of metal price and currency hedging 184 43 – – – 227 Internal revenues 7,286 20 –73 – –7,232 0 21 Revenues 8,303 33,410 –73 – –7,232 34,409 22 Results from participations in associated companies 2 – – – – 2 Operating profit 1,598 210 –140 25 110 1,803 23 Net financial items –222 Profit after financial items 1,581 24 Taxes –288 Net profit for the year 1,294 25

Intangible fixed assets 88 3,042 0 – – 3,130 26 Tangible fixed assets 18,883 8,372 93 – – 27,348 27 Equity shares and other financial fixed assets 4 1 29 – – 33 Inventories 941 7,192 – – –102 8,031 28 Other receivables 842 1,636 492 329 –777 2,523 Assets in capital employed 20,758 20,242 614 329 –879 41,064 29 Provisions, other than for pensions and tax 1,212 437 31 – – 1,681 Other liabilities 1,257 4,014 367 72 –777 4,932 30 Liabilities in capital employed 2,469 4,451 398 72 –777 6,612 31 Total capital employed 18,288 15,791 216 257 –102 34,451 Depreciation 1,917 913 – – – 2,829 Investments1) 3,763 1,200 12 – – 4,974

1) Excluding capitalised reclamation costs and financial leasing. 2) Comprises unrealised market values attributable to cash flow hedging and minor adjustments for other accounting principles only followed up at Group level. The market values of the cash flow hedges are, when realised, reported in the respective segments.

BOLIDEN ANNUAL REPORT 2014 77 FINANCIAL REPORTING | Notes

01 Note 02 Information per segment and geographical market, cont.

02 Boliden has three customers within Segment Smelters who account Assets in capital employed 31-12-2014 31-12-2013 for 15 per cent (16%), 10 per cent (12%) and 9 per cent (10%), 03 respectively, of Boliden’s external income. Other customers each rep- Sweden 35,658 33,635 resent less than 4 per cent (5%) of Boliden’s total external income. Finland 3,669 3,729 04 Boliden’s metals are sold primarily to industrial customers, but are Norway 1,450 1,504 also sold to base metal dealers and international metal stocks, such Ireland 2,094 2,176 05 as the LME. Other countries 18 21 42,889 41,064 06 Geographical areas Sales figures are based on the country in which the customer is located. Investments in fixed assets1) 31-12-2014 31-12-2013 07 Assets and investments are reported in the location of the asset. Sweden 2,769 3,939 Revenues 2014 2013 Finland 974 564 08 Sweden 5,633 6,161 Norway 166 269 09 Nordic region, other 4,360 4,262 Ireland 313 201 Germany 13,386 11,770 Other countries 0 1 10 UK 6,602 6,918 4,222 4,974

Europe, other 6,661 5,122 1) 11 Excluding capitalised restoration costs and financial leasing. North America 0 5 Sales of metals SEK 32,582 million (SEK 30,380 m), sales of Other markets 249 171 12 ­concentrates SEK 1,678 million (SEK 1,406 m), and other sales 36,891 34,409 accounted for SEK 2,631 million (SEK 2,623 m) of Boliden’s total 13 revenues of SEK 36,891 million (SEK 34,409 m).

14

15

16 Note 03 Employees and personnel costs

17 The Parent Company has no employees. The Group management is employed by Boliden Mineral AB.

18 of whom, of whom, of whom, of whom, Average number of employees1) 2014 women men 2013 women men 19 Subsidiaries Sweden 2,902 613 2,289 2,888 597 2,291 20 Finland 1,059 160 899 936 145 791 Norway 282 43 239 295 48 247 21 Ireland 618 29 589 678 31 647 Other 20 7 13 18 3 15 22 Total in subsidiaries/Group 4,881 852 4,029 4,815 824 3,991

23 1) Refers to full-time employees.

24 Percentage of women at Board and 25 Group management level 2014 2013 Board of Directors 27% 27 % 26 Group management 20 % 20 %

27 2014 2013 Salaries, other remuneration and Salaries and Social security Salaries and ­ Social security 28 social security expenses ­remuneration expenses remuneration expenses Subsidiaries 2,557 885 2,451 623 29 of which, pension expenses –506 –255 30 Group, total 2,557 885 2,451 623 of which, pension expenses –506 –255 31 2014 2013 Salaries and other remuneration broken Board of Directors, Board of Directors, down by country and between Board President & other Other President & other Other Members etc. and other employees senior executives employees senior executives employees Subsidiaries in Sweden 24 1,415 23 1,382 Subsidiaries abroad Finland 4 449 4 400 Norway 2 163 3 169 Ireland 5 483 4 456 Other 1 10 1 9 Group, total 37 2,520 35 2,416

78 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Profit-sharing system Remuneration paid to the President and other senior executives 01 A profit-sharing system was introduced for all employees of the comprises the basic salary, variable remuneration, other benefits Boliden Group in 2007. A profit share is payable when the return and pensions. The term “senior executives” refers to those persons 02 on capital employed reaches 10 per cent, and the maximum profit who have comprised the Group management during the year. The share (SEK 25,000/full-time employee) is payable when the return Group management comprised five persons, including the Presi- on capital employed reaches 20 per cent. The annual maximum dent, at the end of the year. All members of the Group management 03 ­allocation must never, however, exceed one third of the dividend are employed in Sweden. paid to shareholders. The funds cannot be disbursed to employees The breakdown between basic salary and variable remuneration 04 for 3 years. An allocation of SEK 0 (SEK 0) per full-time employee shall be in proportion to the executive’s responsibilities and authority. has been made for 2014 as the return on capital employed was The variable remuneration is maximised to 60 per cent of the basic 05 8 per cent (5%). The allocation for each year is invested in liquid salary for the President, while for other senior executives, it is max- interest-bearing assets and shares in Boliden. imised to 40–50 per cent of the basic salary. 10 percentage points 06 of this is conditional on the purchase of Boliden shares for the gross Remuneration paid to the Board Members and senior executives sum before tax. 07 Principles Pension benefits and other benefits payable to the President and Fees as approved by the Annual General Meeting are payable to the other senior executives are taken into account when determining 08 Chairman of the Board and to Members of the Board. The President fixed and variable remuneration. and Employee representatives receive no Directors’ fees. 09

10 Remuneration and other benefits paid during the year Specification of remuneration paid to the Board Members and senior executives. 11

SEK Directors’ fees/Basic salary Variable remuneration Other benefits Pension benefits 12 2014 2013 2014 2013 2014 2013 2014 2013 13 Board of Directors Anders Ullberg, Chairman 1,325,000 1,200,000 14 Marie Berglund 460,000 430,000 staffan Bohman1) 510,000 480,000 15 Ulla Litzén1) 610,000 580,000 Michael G:son Löw 460,000 430,000 16 Leif Rönnbäck 535,000 505,000 Tom Erixon 460,000 430,000 17

Group management 18 Lennart Evrell, President 7,027,832 6,690,057 0 3) 646,272 4) 190,768 178,309 2,516,128 2,102,250 Other members of the 19 Group management 2) 9,482,767 9,404,715 1,152,977 3) 620,293 4) 417,490 426,212 3,203,516 3,371,356 20 1) These Directors invoice their fees, either wholly or in part, through their own companies, at which point social security contributions are payable. This is cost-neutral for Boliden. 21 2) A total of 4 people in 2013 and 2014. 3) The amounts are attributable to 2014 but will be disbursed in 2015. 22 4) The amounts are attributable to 2013 but were disbursed in 2014. The Directors’ fees shown above also include remuneration for work on the Remuneration and Audit Committees. 23

24 Variable remuneration Severance pay The variable remuneration paid to the President in 2014 was based The President and the company shall give six and twelve months’ 25 on the Group’s return on shareholders’ equity and the Group’s cost notice of the termination of the President’s position, respectively. trend. If notice is given by the company, severance pay corresponding 26 For other members of the Group management, 20 – 60 per cent of to twelve months’ salary is payable, over and above the notice the variable remuneration for 2014 was based on the Group’s financial period pay. Other income shall be offset against the severance pay. 27 goals and 40 – 80 per cent on their personal spheres of responsibility No severance­ pay is payable in the event of notice being given by and individual targets. Other benefits refer primarily to company cars. the President. Other members of the Group management have notice periods of 28 Pensions between three and six months if they give notice themselves. If notice of The President has a defined contribution pension plan to which the termination is given by the company, the period of notice is between six 29 company allocates 35 per cent of the fixed monthly salary on a rolling and twelve months. In addition, severance pay corresponding to a maxi- basis. The President decides for himself the level of survivor annuity, mum of twelve months’ salary shall be payable. Other income shall be 30 indemnity for medical treatment or disability, etc. component of his offset against the severance pay. No severance pay is payable in the insurance solution. The President’s retirement age is 65. event of notice being given by the member of the Group management. 31 All of the other members of the Group management have defined contribution pension plans to which the company allocates 25−50 per Preparation and decision-making process cent of the fixed monthly salary. Extra allocations comprising 20 per See the 2014 Corporate Governance Report for information. cent of the fixed basic salary at 2009 level are made for one of the members of the Group management up to and including 2015. The retirement age is 65.

BOLIDEN ANNUAL REPORT 2014 79 FINANCIAL REPORTING | Notes

01 Auditors’ fees and reimbursement of Note 08 Interest expenses and other similar items Note 04 expenses 02 2014 2013 2014 2013 Interest on loans at accrued 03 Ernst & Young AB acquisition value 128 105 Audit engagements 5 5 Interest on currency futures 9 – 04 Auditing assignments over and Interest on pension provisions 35 47 above audit engagements 1 1 05 Ineffectiveness of hedging of Tax consultancy – – net investments – – 06 Other services 1 1 Ineffectiveness of cash flow 7 7 ­hedging – –1 07 Interest on reclamation reserve 37 29 Other financial items 82 72 08 Note 05 Key expense items 291 253 Deductions have been made from interest payments on loans at the 09 accrued acquisition value for interest capitalisation attributable to 2014 2013 the Garpenberg expansion in the sum of SEK 20 million (SEK 51 m) 10 Raw material costs, for 2014. Boliden’s average interest rate in 2014 totalled 1.72 per incl. inventory changes 19,970 19,557 cent (2.04%), weighted against rolling debt. 11 Personnel costs 3,557 3,207 Energy costs 2,480 2,348 12 Other external costs 4,896 4,749 Depreciation 3,277 2,829 Note 09 Government subsidies 13 34,180 32,689 Government subsidies totalling SEK 32 million (SEK 20 m) were received in 2014 and SEK 32 million (SEK 16 m) was reported in 14 The specification of key expense items relates to the following Income Statement items: “Cost of goods sold”, “Selling expenses”, the Income Statement. The majority of the subsidies were received “Administrative expenses” and “Research and development costs”. in Norway under a CO2 compensation scheme and for energy effi- 15 ciency improvement measures. Depreciation and amortisation 16 are reported under the following Income Statement items 2014 2013 17 Supplementary information to Cost of goods sold 3,257 2,812 Note 10 the Statements of Cash Flow Selling expenses 0 1 18 Administrative expenses 16 14 The Statements of Cash Flow are drawn up in accordance with the indirect method. 19 Research and development costs 3 2 3,277 2,829 2014 2013 20 Interest received Interest on currency futures – 25 21 Note 06 Other operating income – 25 22 2014 2013 Interest paid Interest on currency futures –5 – 23 Payment for sludge deliveries 20 19 Rental income, industrial properties 21 19 Interest on external loans –148 –214 24 Insurance payments – 20 –153 –214 Other 61 44 Liquid assets, as per 31st Dec. 25 102 102 The following items are included in liquid assets Cash and bank balances 865 611 26 Short-term investments 0 0 865 611 27 Note 07 Interest income and other similar items In the 2013 annual accounts, interest received from currency 28 2014 2013 futures included the exchange rate component of certain currency futures, over and above the interest. This has been adjusted in Interest income on liquid assets 2 5 2014 and the interest component only is shown in this note. The 29 Interest on currency futures – 25 2013 comparison year has also been updated. Other 1 1 The interest paid item in the Statement of Cash Flow does not 30 3 31 include interest capitalisation of expansion projects and accrued interest expenses, unlike in the Income Statement. 31 The short-term investments included in liquid assets comprise investments with a term of three months or less at the point of acqui- sition and which can be easily converted into liquid assets. Liquid assets are only exposed to an insignificant risk of value fluctuation.

80 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Note 11 Operational acquisitions 01

On 1st October, Boliden Mineral AB acquired 100 per cent of the Operational acquisition, 1st October 02 shares in Kuhmo Nickel Ltd and its subsidiary companies, including 2014 the copper mine in Kylylahti. The purchase price paid comprises a Cash purchase price paid 718 03 cash payment totalling SEK 718 million. Total purchase price 718 The acquisition includes not only the mining operations, but also 04 exploration rights for copper and nickel deposits. The conditions in the exploration areas are similar to those in Sweden and there are Identifiable assets acquired and 05 a number of synergies with Boliden’s mining, metallurgical and explo- liabilities assumed Fair value ration activities. Intangible and tangible fixed assets 505 06 The fair value of the exploration rights at the time of acquisition Other fixed assets 14 was SEK 177 million after deferred tax. The exploration rights refer Deferred tax receivables 18 to a number of assets classified as measured mineral resources 07 Inventories 29 and a number of other assets classified as indicated or inferred ­mineral resources. The acquisition also includes tangible assets Accounts receivable and other 08 comprising existing mining operation assets. current receivables 63 The Group already owned smelting operations in Finland and the Liquid assets 23 09 acquisition of the Kylylahti mine will see Boliden establish mining Other provisions –30 operations in the country, too. Financial leasing liabilities –18 10 The acquired units’ revenues have positively impacted the Group’s Other current liabilities –63 revenues for the quarter to the tune of SEK 75 million. If the acquisi- 11 tion had occurred on 1st January 2014, the Group’s revenues Total identifiable net assets acquired 541 would have been affected to the tune of SEK 493 million. Surplus value, exploration rights 221 12 The Boliden Group’s pre-tax profit since the acquisition on 1st October was virtually unaffected by the acquired units’ results. Deferred tax on surplus value –44 13 If the acquisition had occurred on 1st January 2014, the Group’s revenues would have been positively affected to the tune of Surplus value, net 177 SEK 83 million. 14 The Boliden Group’s administrative costs include transaction Purchase price paid –718 costs of SEK 5 million in respect of the operations acquired. Liquid assets in the company acquired 23 15 Transaction costs –5 16 Change in the Group’s liquid assets –700 17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

BOLIDEN ANNUAL REPORT 2014 81 FINANCIAL REPORTING | Notes

01 Note 12 Intangible fixed assets

02 Capitalised Patents, development licences and Total intangible 03 expenses similar rights Exploration rights Emission rights Goodwill fixed assets Acquisition values 04 Opening balance on Balance Sheet, 01-01-2013 34 141 – – 3,044 3,219 05 Investments 9 7 – – – 16 Sales and retirements – –3 – – – –3 06 Reclassifications – 4 – – – 4 07 Year’s translation differences – 6 – – –36 –30 Closing balance on Balance Sheet, 08 31-12-2013 43 155 – – 3,008 3,206 Opening balance on Balance Sheet, 09 01-01-2014 43 155 – – 3,008 3,206 Investments 4 5 – – – 9 10 Acquisitions 82 1 221 – – 303 Sales and retirements – – – – – – 11 Reclassifications – 5 – – – 5 12 Year’s translation differences 4 12 11 – 71 98 Closing balance on Balance Sheet, 13 31-12-2014 132 178 232 – 3,079 3,621

Amortisation 14 Opening balance on Balance Sheet, 01-01-2013 0 –59 – – – –59 15 Year’s amortisation –6 –10 – – – –16 16 Sales and retirements – 3 – – – 3 Year’s translation differences – –3 – – – –3 17 Closing balance on Balance Sheet, 31-12-2013 –6 –70 – –76 18 Opening balance on Balance Sheet, 01-01-2014 –6 –70 – – – –76 19 Year’s amortisation –11 –12 – – – –23 20 Sales and retirements – – – – – – Year’s translation differences 0 –6 – – – –7 21 Closing balance on Balance Sheet, 31-12-2014 –17 –88 – – – –106 22 Closing balance, 2013 37 85 – – 3,008 3,130 23 Closing balance, 2014 116 90 232 – 3,078 3,516 Amortisation according to plan, 24 included in the operating profit 2013 –6 –10 – – – –16 25 2014 –11 –12 – – – –23

26 Goodwill Emission rights 27 The Group’s goodwill item arose primarily in conjunction with the The Boliden Group reported a surplus of emission rights in 2014 acquisition of the operations from Outokumpu at the end of Decem- and there was consequently no effect on the Group’s financial 28 ber 2003. The goodwill from the 2003 acquisition has been mainly reports. See Note 1 Significant accounting and valuation principles allocated in its entirety to the Group’s Smelter segment. on page 74 for details of emission rights reporting. Impairment tests have been carried out in the value of goodwill in 29 the manner described in Note 13 under Impairment tests – Intangi- Exploration rights ble and tangible fixed assets. In 2014, Boliden acquired the exploration rights and mining opera- 30 tions of the Kylylahti copper mine in Finland. Intangible fixed assets totalling SEK 221 million in exploration rights were acquired through 31 this acquisition. No depreciation of these assets has occurred.

82 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Note 13 Tangible fixed assets 01

Machinery and Equipment, New construction Total 02 Buildings Deferred other technical tools, fixtures & advances on tangible fixed and land ­mining costs facilities and fittings fixed assets assets 03 Acquisition values Closing balance on Balance Sheet, 04 31-12-2012 7,846 7,823 31,539 1,490 424 49,122 05 Opening balance on Balance Sheet, 01-01-2013 7,846 7,823 31,539 1,490 424 49,122 06 Investments 131 1,244 3,183 22 374 4,954 Capitalised reclamation costs – – 23 – – 23 07 Sales and retirements –50 – –619 –10 – –679 Reclassifications 444 17 –295 –2 –168 –5 08 Year’s translation differences –12 48 140 –125 9 59 09 Closing balance on Balance Sheet, 31-12-2013 8,359 9,132 33,970 1,375 638 53,474 10 Opening balance on Balance Sheet, 01-01-2014 8,359 9,132 33,970 1,375 638 53,474 11 Investments 115 1,230 1,806 64 267 3,482 Acquisitions 91 151 150 – 34 425 12 Capitalised reclamation costs – – 358 – – 358 13 Sales and retirements –69 –327 –578 –11 –3 –988 Reclassifications 91 291 –1 90 –477 –6 14 Year’s translation differences 133 112 562 –10 17 813 Closing balance on Balance Sheet, 15 31-12-2014 8,720 10,588 36,267 1,508 476 57,558 16 Depreciation Closing balance on Balance Sheet, 17 31-12-2012 –3,529 –3,195 –15,988 –1,273 – –23,984

Opening balance on Balance Sheet, 18 01-01-2013 –3,529 –3,195 –15,988 –1,273 – –23,984 Year’s depreciation –263 –778 –1,726 –40 – –2,809 19 Sales and retirements 50 – 612 10 – 671 Reclassifications – – –1 1 – 0 20 Year’s translation differences 10 –26 –98 111 – –4 21 Closing balance on Balance Sheet, 31-12-2013 –3,733 –3,999 –17,202 –1,192 – –26,126 22 Opening balance on Balance Sheet, 01-01-2014 –3,733 –3,999 –17,202 –1,192 – –26,126 23 Year’s depreciation –293 –819 –2,081 –46 – –3,238 Sales and retirements 63 327 556 11 – 957 24 Reclassifications 0 113 –113 0 – 0 25 Year’s translation differences –80 –50 –407 6 – –531

Closing balance on Balance Sheet, 26 31-12-2014 –4,042 –4,428 –19,246 –1,220 – –28,935

Closing balance, 2013 4,626 5,132 16,768 183 638 27,348 27 Closing balance, 2014 4,677 6,160 17,021 288 476 28,623 28 Depreciation according to plan included in the operating profit 29 2013 –263 –778 –1,726 –40 – –2,809

2014 –293 –819 –2,081 –46 – –3,238 30

Capitalised reclamation costs include expenses in relation to the dis- Depreciation and amortisation of intangible and tangible fixed assets 31 mantling and removal of assets and the restoration of the sites where according to plan total SEK 3,261 million in the Balance Sheet and the assets are located. Accumulated capitalised reclamation costs SEK 3,277 million in the Income Statement. The difference is due to total SEK 1,145 million (SEK 787 m). Accumulated depreciation totals the fact that the Income Statement includes net values for sales and SEK –188 million (SEK –139 m). The year’s capitalised reclamation retirements. costs total SEK 358 million (SEK 23 m) and are primarily attributable Investments in tangible fixed assets include financial leasing in the to the expansion of the Aitik mine to 45 Mtonnes of ore per annum sum of SEK 0 million (SEK 0 m), see also Note 14 Leasing charges. and the associated extension of mining operations until 2040. The The same principle applies to financial leasing as to the year’s capital- change is reported in accordance with IFRIC 1, Changes in Existing ised reclamation costs with regard to key ratios and cash flow. Decommissioning, Restoration and Similar Liabilities. The year’s recla- At the end of the year, there were no material, contractual under- mation costs are not included in the consolidated key ratios for the takings to acquire tangible fixed assets to report. year’s investments, and have no liquid effect on the Group’s cash flow.

BOLIDEN ANNUAL REPORT 2014 83 FINANCIAL REPORTING | Notes

01 Note 13 Tangible fixed assets, cont.

02 Interest expenses carried forward included in the residual 31-12-2014 31-12-2013 03 value according to plan Reported value, Interest Reported value, Interest SEK m rate, % SEK m rate, % 04 Rönnskär’s expansion, completed 2000 37 6.8 40 6.8 Odda’s expansion, completed 2004 7 4 8 4 05 Aitik’s expansion, completed 2011 195 2.5 208 2.5 Rönnskär, electronic scrap recycling, completed 2012 12 3.15 13 3.15 06 Garpenberg’s expansion, ongoing project 103 1.71 87 2.07

07 Impairment tests – Intangible and tangible fixed assets (see sensitivity table on page 51 of the Risk management section of 08 Impairment tests are carried out yearly, or throughout the year if an the Directors’ Report). The present value of estimated future cash event occurs that may result in an impairment requirement, and are flows is based on the budget and planning prices adopted by the 09 based on the Group’s annual budget and strategic planning work. Board of Directors. Planning prices for the first year comprise the The planning horizon is the estimated lifespan of each mine and 10 relevant futures prices on metals and currency markets. The long- years for smelters. Boliden’s operations are characterised by long-term term planning prices used in year two and thereafter consist of an 10 production plans in which every mine has set production plans for the anticipated average price over a single business cycle, generally ten entire estimated lifespan of the mine in question, while a substantial part years. The long-term planning prices are based on internal and exter- 11 of the smelters’ concentrate supply is regulated by means of long-term nal analyses, primarily with regard to anticipated demand for metals delivery agreements. This long-term production planning also enables and margin costs for metal producers. The long-term planning prices 12 the use of long-term cash flow forecasts. Additional growth assumptions are compared with average long-term prices from different market are not included in extrapolated cash flow forecasts beyond the planning players, such as industry analysts and other mining and smelting 13 horizon. Any residual value of fixed assets at the end of a mine’s lifespan companies. The Group does not believe that futures prices from base is not taken into account in the discounted cash flow. metals markets are good indicators of long-term price trends, in that 14 The value of discounted cash flows is highly sensitive to metal they are heavily dependent on spot prices. The long-term real plan- prices, treatment and refining charges (TC/RC), and exchange rates ning prices are currently as listed in the table below. 15 2014 2013 16 Metal prices Treatment/refin. charges Exchange rates Metal prices Treatment/refin. charges Exchange rates

17 Copper USD 6,600/t USD 70/tonne Usc 7.0/lb USD/SEK 6.50 USD 6,600/t USD 70/tonne Usc 7.0/lb USD/SEK 6.70 Zinc USD 2,300/t USD 250 base USD 2,300 USD/NOK 5.90 USD 2,300/t USD 250 base USD 2,300 USD/NOK 5.98 18 Lead USD 2,300/t USD 225 EUR/USD 1.30 USD 2,300/t USD 225 EUR/USD 1.27 Gold USD 1,200/tr. oz. USD 1,200/tr. oz. 19 Silver USD 20.0/tr. oz. USD 20.0/tr. oz.

20 Individual mines or mining areas with centralised concentrating facili- for metals by 10 per cent would not result in any write-down require- ties, copper smelters, zinc smelters, Boliden Bergsöe AB and Boliden ments for Segment Smelters or Mines. Nor, if the long-term planning 21 Commercial AB are classified as cash-generating units. The discounted prices for metals remain unchanged, would a 10 per cent weakening of real cash flows before tax for the respective cash-generating units are the US dollar against all other currencies occasion a write-down 22 compared with the book value of capital employed. The cash flows are requirement for Segment Smelters or Mines. This presupposes, how- discounted with a real discount rate before tax of 10 per cent (10%), ever, no compensatory movements in metal prices, TC/RC, or the 23 which corresponds to the weighted capital cost. The Group’s goodwill is prices of by-products or input goods, which has historically often been allocated to Segment Smelters. The value in use of the Group’s assets the case. A 10 per cent fall in TC/RC for all metals would not result in 24 is held to exceed the reported values and no impairment requirement is any write-down requirement in Segment Smelters. For Segment Mines, consequently deemed to exist. the same fall would have a positive effect. 25 An increase in the discount rate of one percentage point would not give rise to any write-downs. A lowering of all long-term planning prices 26

27 Note 14 Leasing charges 28

29 2014 2013 The Group 30 Assets held via operational leasing agreements Leasing charges paid during the financial year 18 22 31 Contracted future leasing charges Maturity within one year 18 12 Maturity later than one year, but within five years 24 13 Maturity later than five years 1 1

Assets held via financial leasing agreements 2014 2013 Machinery and other equipment Acquisition value 40 15 Accumulated depreciation –21 –10 Value, as per Balance Sheet, on 31st December 19 5

The companies with financial leasing agreements are Kylylahti Copper the rent of and renewal of a water purification plant’s automation OY and Kokkolan Teollisuusvesi OY. Kylylahti’s leasing agreements ­system and another in respect of usufruct for active carbon filters for refer to mining machinery. Kokkolan has an agreement in respect of ionized water replacement systems and domestic water supply.

84 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Note 15 Participations in Group companies 01

Specification of the Parent Company’s and the Group’s holdings of participations in Group companies 02

31-12-2014 03 Subsidiary/Co. Reg. no./Registered office Shares/participations Percentage share Book value Boliden Limited, 3977366, Toronto, Canada 85,811,638 100 – 04 Boliden Power Ltd, 700245, Toronto, Canada – 05 Ontario Inc, 1393512, Toronto, Canada – Boliden BV, 18048775, Drunen, Netherlands – 06 Boliden Apirsa S.L under liquidation, ESB-41518028, Aznalcóllar (Seville), Spain – 07 Boliden Mineral AB, 556231-6850, Skellefteå 1,650,000 100 3,911 Mineral Holding Sweden AB, 556610-2918, Skellefteå – 08 Boliden Harjavalta Oy, 1591739-9, Harjavalta, Finland – Boliden Kokkola Oy, 0772004-3, Kokkola, Finland – 09 Kokkolan Teollisuusvesi OY, 2558533-2, Kokkola, Finland – Boliden Commercial AB, 556158-2205, Stockholm – 10 Boliden Commercial UK Ltd, 5723781, Warwickshire, UK – 11 Boliden Commercial Deutschland GmbH, 165903, Neuss, Germany – Tara Mines Holding Ltd, 60135, Navan, Ireland – 12 Boliden Tara Mines Ltd, 33148, Navan, Ireland – APC Properties Ltd, 361022, Navan, Ireland – 13 Irish Mine Development Ltd, 174811, Navan, Ireland – Tara Prospecting Ltd, 34434, Navan, Ireland – 14 Tara Exploration and Development Company Ltd, E1292, Navan, Ireland – 15 Dowth Investment Holdings Ltd, 338698, Toronto, Canada – Motet Investments Ltd, E3093, Navan, Ireland – 16 Boliden Odda AS, 911177870, Odda, Norway – Boliden Bergsöe AB, 556041-8823, Landskrona – 17 Boliden Bergsoe AS, A/S244629, Glostrup, Denmark – Boliden International AB, 556040-1399, Skellefteå – 18 Kuhmo Nickel Ltd, 05311516, London, UK Kylylahti Copper Oy, 1925412-3, Polvijärvi, Finland 19 Vulcan Exploration BV, 821652345, Amsterdam Zuidoost, ­Netherlands 20 Kuhmo Metals Oy, 1925450-2, Polvijärvi, Finland 21 Other subsidiaries, dormant or of lesser significance –

22 A new service-driven collaboration company by the name of Kokkolan On 1st October 2014, Boliden Mineral AB acquired 100 per cent of Teollisuusvesi Oy was formed on 31st December 2013 in which the shares in Kuhmo Nickel Ltd and its subsidiary companies, Boliden Kokkola holds a 65% proprietary share. In 2014, Balance together with the Kylylahti copper mine. For additional information, 23 Sheet values were transferred to this new company from KIP Service see Note 11. OY which, as of 2014, is an associated company. The Parent Com- 24 pany, Boliden AB, has received a dividend totalling SEK 464 million (SEK 2,442 m) from Boliden Mineral AB during the year. 25

26

27 Note 16 Participations in associated companies 28

31-12-2014 31-12-2013 29 Book value at beginning of year 9 8 Participations in associated companies acquired 7 – 30 Share in associated companies’ profits for the year 3 2 Book value at year-end 19 9 31

Registered Number of Percentage Value of equity share Co. reg. no. office participations share in the Group Indirectly owned KIP Service OY 2240650-3 Kokkola 3,280 46 7 Aitik EcoBallast AB 556726-2299 Gällivare 500 50 6 KB Aitik EcoBallast 969731-9748 Gällivare 1,000 50 – Industrikraft i Sverige AB 556761-5371 Stockholm 20,000 20 5 19 KIP Service OY was formerly a subsidiary company but is now, as of 2014, an associated company.

BOLIDEN ANNUAL REPORT 2014 85 FINANCIAL REPORTING | Notes

01 Note 17 Taxes

02 Current tax expenses 2014 2013 Tax expenses for the period –311 –170 03 Adjustment of tax attributable to previous years –15 22 04 –326 –148 Deferred tax expenses (–) /tax income (+) 05 Deferred tax income/tax expenses in respect of temporary differences –186 –166 Deferred tax revenue in capitalised loss carry forwards for tax purposes during the year – 26 06 Deferred tax expense resulting from the utilisation of previously capitalised fiscal value in loss carry forward deductions –60 – 07 –246 –140 Total reported tax expenses (–) /tax income (+) –572 –288 08

09 Reconciliation of effective tax Reported profit before tax 2,471 1,581 10 Tax according to current taxation rate –542 –359 Fiscal effect of non-deductible expenses –17 –6 11 Fiscal effect of non-taxable income 1 10 Market valuation of deferred tax receivables 1 1 12 Amended tax rate in Finland – 48 Amended tax rate in Norway – 1 13 Adjustment of tax attributable to previous years –15 17 14 Total reported tax expenses –572 –288

15 Tax expenses comprise 23.1 per cent (18.2%) of the Group’s pre-tax profit. The anticipated tax expense for 2014 of 21.9 per cent (22.7%) has been calculated given the current Group structure and applicable taxation rates in the respective countries. 16

Deferred tax receivable/tax liability 17 The receivable reported in the Balance Sheet and the provision for deferred tax come from the following assets and liabilities.

18 31-12-2014 31-12-2013 Deferred tax Deferred tax Deferred tax Deferred tax 19 The Group receivable liability Net receivable liability Net Intangible assets – – – 1 –4 –3 20 Buildings and land 88 –106 –18 32 –106 –74 21 Machinery and fixtures and fittings 13 –2,588 –2,575 – –2,413 –2,413 Deferred mining costs – –219 –219 – –173 –173 22 Other tangible fixed assets – –5 –5 – –5 –5 Inventories – –374 –374 – –356 –356 23 Long-term liabilities 341 – 341 235 – 235 Current liabilities – –18 –18 – –76 –76 24 Tax losses carried forward – 23 23 81 – 81 25 Total 442 –3,287 –2,845 349 –3,133 –2,784 Offset within companies –426 426 – –281 281 – 26 Total deferred tax receivable/tax liability 17 –2,862 –2,845 68 –2,852 –2,784 27 Change in deferred tax in respect of temporary differences and tax losses carried forward 28 Amount Reported Reported under 29 at the beginning in the Income Other comprehen- Translation Amount The Group, 2014 of the year ­Statement sive income ­difference at year-end 30 Intangible assets –3 3 – – – Buildings and land –74 58 – –2 –18 31 Machinery and fixtures and fittings –2,413 –147 – –15 –2,575 Deferred mining costs –173 –34 – –12 –219 Other tangible fixed assets –5 – – – –5 Inventories –356 –18 – – –374 Long-term liabilities 235 –48 144 10 341 Current liabilities –76 – 58 – –18 Tax losses carried forward 81 –60 – 2 23 Total –2,784 –246 –202 –17 –2,845

86 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Change in deferred tax in respect of temporary differences and tax losses carried forward 01 Amount Reported Reported under at the beginning in the Income Other comprehen- Translation Amount 02 The Group, 2013 of the year ­Statement sive income ­difference at year-end Intangible assets –3 – – – –3 03 Buildings and land –47 –24 – –3 –74 04 Machinery and fixtures and fittings –2,245 –166 – –2 –2,413 Deferred mining costs –172 5 – –6 –173 05 Other tangible fixed assets –6 1 – – –5 Inventories –463 107 – – –356 06 Long-term liabilities 323 –90 1 1 235 Current liabilities 40 – –116 – –76 07 Tax losses carried forward 60 27 – –6 81 08 Total –2,513 –140 –115 –16 –2,784

09 Tax losses carried forward Deferred tax receivables in respect of tax losses carried forward in tax losses carried forward for which a deferred tax receivable has Norway have been taken into account in full as the company is of the not been reported totalled SEK 93 million (SEK 91 m) in Canada on 10 opinion that Boliden will be able to generate sufficient taxable income 31st December 2014, of which SEK 1 million matures in 2015, and in the future to exploit these tax losses carried forward. Unutilised the remaining SEK 92 million between 2026 and 2034. 11

12

13

Note 18 Inventories Note 20 Other current receivables 14

31-12-2014 31-12-2013 31-12-2014 31-12-2013 15 Raw materials and consumables 3,527 3,480 Other prepaid expenses and 16 Goods under manufacture 3,044 3,039 accrued income 190 136 VAT recoverable 515 435 Finished goods and tradable goods 1,314 1,512 17 7,885 8,031 Other current receivables 271 306 976 877 18

19

Note 19 Accounts receivable Note 21 Affiliates 20

On 31st December 2014, accounts receivable to a total value of Relationships 21 SEK 7 million (SEK 45 m) were due for payment after more than The Parent Company’s directly owned subsidiaries are reported in 30 days, corresponding to 0.5 per cent (4.3%) of the total accounts Note 15 on page 85, Participations in Group companies, while its par- 22 receivable. The maturity structure is shown in the following table: ticipations in associated companies are reported in Note 16, Partici- pations in Associated companies, on page 85. Information regarding 23 31-12-2014 31-12-2013 the Members of the Board and Group management, and the remuner- Accounts receivable, not due 1,018 733 ation paid to the same, is presented in Note 3, Employees and person- nel costs, on pages 78−79, and in the Corporate Governance Report 24 Due: 0 – 30 days 319 270 on pages 100 −108. Due: 31– 60 days 4 28 25 Transactions Due: 61– 90 days 2 1 No Member of the Board or senior executive in the Group partici- Due: >90 days 1 16 26 pates or has participated, directly or indirectly, in any business 1,344 1,048 transactions during the current or previous financial year between themselves and the Group which are or were unusual in nature with 27 The majority of the Group’s accounts receivable relate to European regard to their terms. Nor has the Group granted loans, issued customers. Accounts receivable in foreign currencies have been guarantees or provided sureties to any of the Members of the Board 28 ­valued at the closing day rate. Note 2, Information per business or senior executives of the company. ­segment and geographical market, on page 78 shows the break- 29 down of revenues by geographical area. Accounts receivable are only written down to a minor extent and 30 doubtful receivables total only small amounts. Confirmed bad debt losses are insignificant. Only 0.0 per cent (2.0) of the total amount of accounts receivable 31 is due from customers in Greece, Italy, Spain and Portugal. The risk management of these customers is handled by means of a requirement for payment in advance. For information on the management of credit risks, see the sec- tion entitled Credit risks in accounts receivable that forms part of the Risk management section of the Directors’ Report on page 51.

BOLIDEN ANNUAL REPORT 2014 87 FINANCIAL REPORTING | Notes

01 Note 22 Shareholders’ equity

Shareholders’ equity 02 Share capital 31-12-2014 31-12-2013 The Articles of Association for Boliden AB state that the share capital Opening number of shares 273,511,169 273,511,169 03 shall comprise a minimum of SEK 150,000,000 and a maximum of Share cancellation – – SEK 600,000,000. The share capital comprises a single class of share. 04 Bonus issue – – There are no potential shares and hence no dilution effect. Closing number of shares 273,511,169 273,511,169 The Annual General Meeting of the Company’s shareholders held on 6th May 2014 resolved to pay a dividend of SEK 1.75 (SEK 4) per 05 Nominal value, SEK 578,914,338 578,914,338 share, equivalent to a total payment of SEK 478,644,546. Nominal value per share 2.12 2.12 Boliden’s Board of Directors will propose to the Annual General 06 Meeting that a dividend of SEK 2.25 (SEK 1.75) per share be paid, equivalent to a total of SEK 615,400,130. Boliden’s dividend policy 07 Shareholders’ equity, SEK m 31-12-2014 31-12-2013 stipulates that approximately one third of the net profit after tax shall Share capital 579 579 be disbursed in the form of dividends. 08 Total shareholders’ equity 23,974 23,075 Earnings per share Shareholders’ equity attributable to Earnings per share are calculated by dividing the profit for the period 09 the Parent Company’s shareholders 23,968 23,059 attributable to the Parent Company’s shareholders by the average Shareholders’ equity number of shares. 10 per share, SEK 87.63 84.31

11 Asset management Earnings per share 2014 2013 Boliden’s managed assets comprise shareholders’ equity. There are no other external capital requirements than those mandated in the 12 Profit for the year, SEK m 1,899 1,294 Swedish Companies Act. Average number of shares, Boliden monitors its capital structure with the aid of the net debt/ 13 basic and diluted 273,511,169 273,511,169 equity ratio, amongst other things. The net debt/equity ratio is calcu- Number of own shares held – – lated as the net of interest-bearing provisions and liabilities minus finan- 14 Earnings per share, SEK 6.94 4.72 cial assets including liquid assets divided by shareholders’ equity. See page 20 for details of Boliden’s dividend policy and net debt goal. 15

16

17 Note 23 Provisions for pensions and similar undertakings

18 Boliden has established pension plans in the countries in which the Ireland company operates. The pension plans include both defined benefit The pension undertaking is secured by the transfer of funds to four 19 and defined contribution plans. The defined benefit plans provide the defined benefit plans and one defined contribution plan. The defined employee with a fixed amount of their final salary in conjunction with benefit plans are closed to new employees. The pension plans are 20 retirement. Boliden’s defined benefit plans are mainly operated in controlled by the Irish Pensions Board and Irish Pensions Legislation. Sweden and Ireland, with a very small number also operated in Nor- All defined benefit plans are invested in funds. The biggest defined 21 way. The defined contribution plans comply with local regulations in benefit plan and the defined contribution pension plan have Board Mem- the respective countries. Boliden has defined contribution plans in bers from both the company and the members. Boliden has appointed 22 Sweden, Ireland, Finland and Norway. the Irish Pension Trust to manage the other defined benefit plans. The financial position of the pension plans is reviewed every three 23 Sweden years by an actuary in order to determine the requisite financing level. Boliden’s pension undertakings in Sweden are not invested in funds. When a pension plan is deemed to be in deficit, which is currently the The pension undertakings are secured through the Swedish PRI/ case for the four defined benefit plans, a financing proposal must be 24 FPG system and through insurance companies. The majority of the submitted to the Irish Pension Board in order to demonstrate how the pension undertakings for salaried employees are secured through deficit will be cleared. The actuary also ensures that Boliden receives 25 insurances with Alecta and are lifelong retirement pensions. The annual reports on the financial position in accordance with accounting benefits offered by the lifelong pensions are determined using differ- requirements. Payments are made to all five plans through a combina- 26 ent percentages for different salary intervals. Alecta has not pro- tion of contributions from both Boliden and employees in accordance vided sufficient information for 2014 for the ITP plan (supplementary with employment contracts. No other deposits are made. 27 pensions for salaried employees) to be reported as a defined benefit The Board of the pension undertakings is responsible for invest- plan, and it is consequently reported in accordance with UFR 6 as a ments in plan assets. The majority of the shares are invested in compa- 28 defined contribution plan. A surplus in Alecta can be allocated to the nies operating in the health care, financial services and raw materials policyholders and/or those insured. At the end of the year, Alecta’s sectors that are based in North America, 51 per cent, and Europe, 29 collective consolidation level was 144 per cent (148%). The collec- 41 per cent, and which are measured against sector indices. Some of tive consolidation level comprises the market value of Alecta’s assets the shares are invested in index funds. All interest-bearing securities 30 as a percentage of the insurance undertakings calculated in accord- entail investments in government bonds and investments of this kind ance with Alecta’s actuarial calculation assumptions, which do not were made in 2013 in order to reduce the risk and secure the pension 31 correspond with those of IAS 19. Boliden’s pension undertakings liability. The majority of the government bonds (95 per cent) are account for only a very small percentage of Alecta’s insurance invested in companies whose registered offices are in Europe. Liquid undertakings. There are, in addition to the ITP plan, a few previously assets are held in order to facilitate pension disbursements. Invest- earned temporary retirement pensions within Boliden. ments in real estate are no longer part of the investment strategy and “Gruvplanen” (GP) is a pension agreement for underground work- are in the process of being wound up. ers. The plan grants underground workers entitlement to receive a pension between the ages of 60 and 65 and between 65 and 70 Norway under certain preconditions based on an average income. The “Gruv- The pension undertaking is primarily secured by means of defined planen” plan was closed to new earners in 2011 and replaced by a contribution pension plans in that Boliden wound up the majority of defined premium pension plan (GLP). The commitments change the defined benefit plans in 2012. The defined benefit plan only com- from vesting to non-vesting in conjunction with retirement. prises the operations manager. Other employees in Norway are cov- ered by a defined contribution plan that covers all employees and a contractual early retirement pension (AFP) with supplementary ben- efits from the ages of 62 to 67.

88 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Events during the year Assumptions during the year 01 The present value of Boliden’s pension undertakings is higher than Costs, undertakings and other factors in pension plans are calcu- the level last year (restated) and the market value of the Group’s lated by means of the Projected Unit Credit Method, using the 02 plan assets has increased by 25 per cent. The change in the pre- assumptions shown in the table below. sent value of pension undertakings derives primarily from the lower The discount rate is established for every geographical market with discount rates in Sweden and Ireland. reference to the market return on company bonds on the closing day. In 03 The Group’s reported pension liability totals SEK 1,468 million Sweden, where there is no functioning market for such bonds, the mar- (SEK 1,047 m), which sum includes endowment insurance and similar ket return on housing bonds has been used and a premium for a longer 04 undertakings totalling SEK 67 million (SEK 66 m) in respect of defined term added, based on the duration of the pension undertakings. premium pension plans in Sweden. The financing cost of the net pension liability is calculated with the aid 05 of the discount rate and is reported under Boliden’s net financial items. 06

Sweden Ireland Other 07 Actuarial assumptions (weighted averages) 2014 2013 2014 2013 2014 2013 Discount rate, % 2.75 3.75 2.1 3.75 4.00 3.90 08 Future pay increases, % 3.00 3.00 0.00 0.00 3.75 3.50 09 Future pension increases, % 1.50 1.75 0.00 0.00 0.60 0.00 Life expectancy 10 women 90 90 90 88 men 88 88 88 90 11

Sweden Ireland Other Total 12 Specification of provisions for pensions 2014 2013 2014 2013 2014 2013 2014 2013 13 Pension undertaking at the beginning of the year 631 638 339 668 11 10 981 1,317 Restatement, IAS 19 – – – – – – – – 14 Pension undertaking at the beginning of the year, restated 631 638 339 668 11 10 981 1,317 15 Defined benefit plan costs 45 35 42 –154 4 9 91 –110 Revaluations for Other comprehensive income 108 –8 291 –135 – – 399 –143 16 Payments and disbursements –40 –35 –59 –59 –6 –8 –105 –103 17 Translation differences – – 34 18 0 34 18 1) Pension undertaking at the end of the year 744 631 648 339 9 11 1,401 981 18 Endowment insurance and similar undertakings 67 66 – – – – 67 66 Net debt, as per Balance Sheet 2) 810 697 648 339 9 11 1,468 1,047 19

Specification of provisions for pensions, 20 as per 31st December Pension undertakings invested in funds – – 2,599 1,900 1 1 2,600 1,901 21 Pension undertakings not invested in funds 744 631 – – 8 11 752 642 of which, special payroll tax 82 67 – – – – 82 67 22 Fair value of plan assets – – –1,951 –1,561 0 0 –1,951 –1,561 Pension undertakings 744 631 648 339 9 11 1,401 981 23 Endowment insurance and similar undertakings 67 66 – – – 67 66 24 Net debt, as per Balance Sheet 810 697 648 339 9 11 1,468 1,047

Specification of costs 25 Cost of defined benefit plans 26 Costs in respect of service during the period 28 19 31 34 4 9 63 62

Interest expense on undertaking 22 19 73 73 – – 95 93 27 Interest income from plan assets – – –60 –48 – – –60 –48 Special payroll tax and other taxes –5 –5 – – – – –5 –5 28 Administrative costs and premiums paid – – 6 3 – – 6 3 Settlements/reductions of pension plans – 1 –8 –217 0 0 –8 –216 29 Total cost of defined benefit plans 45 35 42 –154 4 9 91 –110 30 Cost of defined contribution plans 328 310 –6 2 – 99 322 410 Total pension costs 373 345 37 –153 4 108 414 300 31

1) Undertakings in Sweden include undertakings in accordance with PRI/FGI totalling SEK 375 million (SEK 281 m), undertakings for underground workers totalling SEK 287 million (SEK 284 m), and other undertakings totalling SEK 3 million (SEK 3 m). 2) The pension liability reported in the Balance Sheet includes not only the defined benefit pension undertaking and endowment insurance but also special payroll tax in Sweden.

BOLIDEN ANNUAL REPORT 2014 89 FINANCIAL REPORTING | Notes

01 Note 23 Provisions for pensions and similar undertakings, cont.

02 Sweden Ireland Other Total Reconciliation of pension undertaking 2014 2013 2014 2013 2014 2013 2014 2013 03 Present value of undertakings at the beginning of the year 631 638 1,900 1,953 11 10 2,541 2,602 04 Cost in respect of service during the current period 28 19 31 34 4 9 63 62 05 Interest expense on undertaking 22 19 73 73 – – 95 93 06 Special payroll tax –5 –5 – – – – –5 –5 Fees from plan participants – – 18 16 – – 18 16 07 Revaluation of defined benefit pension liability 108 –8 498 26 – – 606 18 of which profit/loss as a result of financial 08 assumptions 90 –18 600 –7 – – 690 –25 of which profit/loss as a result of 09 experience-based assumptions 18 10 –102 33 – – –84 43 Disbursements made –40 –35 –59 –58 –6 –8 –105 –103 10 Disbursements in conjunction with terminations Reductions and settlements 1 1 –8 –217 – – –7 –216 11 Translation differences – – 147 73 0 0 147 72 12 Present value of undertakings at the end of the year 744 631 2,599 1,900 9 11 3,352 2,541 13 Endowment insurance and similar undertakings 67 66 67 66 of which amounts attributable to active employees 426 348 1,515 1,027 4 4 1,945 1,378 14 of which amounts attributable to holders of paid up policies 167 138 173 120 – – 340 258 15 of which amounts attributable to retired ­employees 218 211 911 752 5 7 1,134 970 16 Reconciliation of plan assets

17 Fair value of plan assets at the beginning of the year – – 1,561 1,285 0 0 1,561 1,285 18 Interest income on plan assets – – 60 48 – – 60 48 Return on plan assets excluding amounts 19 included in net interest items – – 209 163 – – 209 163 Fees from the employer excluding disburse- 20 ments in conjunction with terminations – – 59 61 – – 59 61 Fees from plan participants – – 18 16 – – 18 16 21 Disbursements made – – –59 –60 – – –59 –60 Administrative costs, taxes and premiums paid – – –8 –3 – – –8 –5 22 Exchange rate fluctuations – – 112 50 – – 112 53 Fair value of plan assets at the end of the year – – 1,951 1,561 0 0 1,951 1,561 23 Net debt, as per Balance Sheet 1,468 1,047

24 Specification of plan assets Listed shares and participations – – 805 833 0 0 805 833 25 Interest-bearing securities – – 1,113 690 – – 1,113 690 26 Liquid assets – – 29 35 – – 29 35 Real estate – – 3 3 – – 3 3 27 Other – – – – – – – – – – 1,951 1,561 0 0 1,951 1,561 28

29

30

31

90 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Sensitivity analysis of the effect on the defined benefit pension 01 ­liability (+increase/-decrease in pension liability) Sweden Ireland Total Significant actuarial assumptions 2014 2014 2014 02 Discount rate, % +0,5 –43 –232 –275 –0,5 49 233 282 03 Pay increases, % +0,5 42 38 80 04 –0,5 –35 – –35

Increased life expectancy, years Men + 1 13 53 66 05 Women + 1 –13 4 –9 06 The sensitivity analysis has been conducted on the basis of the above- ­individually and the calculations have not taken into account any mentioned actuarial changes as Boliden is of the opinion that they ­interdependence between the assumptions. No sensitivity analysis 07 can have a substantial impact on the pension liability. It is also likely has been conducted for Norway as the amounts in question are that changes to these assumptions will be made. The calculations ­insignificant. Other countries do not have any defined benefit pension have been performed by means of the analysis of each change liabilities. 08

09 Defined benefit pension liability terms Sweden Ireland Other Total Benefits scheduled for disbursement within 12 months 39 60 2 101 10 Benefits scheduled for disbursement within 1−5 years 167 331 4 502 Benefits scheduled for disbursement after 5 years or more 393 465 6 864 11

The maturity of plan assets in Ireland have reduced anticipated pay- 12 ments after 5 years or more. The weighted average duration of the defined benefit pension liability is 17 years for Sweden and 15 years 13 for Ireland. 14

15

Note 24 Other provisions 16

Reclamation costs 17 31-12-2014 31-12-2013 Provisions for reclamation costs are made on the basis of an assess- Reclamation costs 2,057 1,651 ment of future costs based on current technology and other condi- 18 Other 62 30 tions. Provision has been made for the current value of estimated 2,119 1,681 undertakings in accordance with IAS 37 and IFRIC 1. Gradual reclama- 19 tion is preferable, although most of the reclamation work is carried out Of which: after a decision to decommission. In historical terms, Boliden has suc- 20 Long-term 1,875 1,512 ceeded in extending the useful life of its mining assets compared with Short-term 244 169 the original plans. Reclamation provisions are reviewed on an ongoing 21 2,119 1,681 basis. The year’s addition to existing provisions is primarily attributable to the expansion of the Aitik mine to 45 Mtonnes of ore per year and the associated extension of the mine’s operational lifespan to 2040. 22

23 2014 2013 Reclamation Reclamation 24 The Group costs Other Total costs Other Total Book value at beginning of year 1,651 30 1,681 1,618 32 1,650 25 Additions to existing provisions 433 34 467 68 6 74 Acquisitions 23 3 26 26 Reversal of existing provisions –5 – –5 –7 –7 –14 27 Payments –100 –5 –105 –70 –1 –71 Discount effect for the period 37 – 37 29 – 29 28 Translation difference 18 0 18 13 0 13 Book value at year-end 2,057 62 2,119 1,651 30 1,681 29

Anticipated date of outflow of resources: 30 Within one year 220 24 244 164 5 169 Between one and two years 230 10 240 156 1 157 31 Between three and five years 130 1 131 182 0 182 More than five years 1,477 26 1,503 1,148 24 1,172 2,057 62 2,119 1,651 30 1,681

Note 25 Risk information

See the section entitled “Risk management” in the Directors’ Report on pages 47–51 for a description of Boliden’s financial risks. The amounts reported refer to the Group.

BOLIDEN ANNUAL REPORT 2014 91 FINANCIAL REPORTING | Notes

01 Note 26 Financial liabilities and maturity structure

02 31-12-2014 Financial liabilities Maturity structure 2) Interest1), Reported 03 SEK m Currency % amount 2015 2016 2017 2018 2019 2020+ Syndicated credit facility EUR 0.80 1,226 10 10 1,230 04 Bilateral loans EUR 1.73 2,621 370 363 705 792 206 328 05 Bilateral loans SEK 2.00 800 9 236 6 6 6 576 Debenture loan SEK 2.97 500 15 15 15 15 15 505 06 Commercial papers 3) SEK 1.54 2,518 2,518 Leasing, other 19 13 4 2 1 07 Accounts payable 3,764 3,764 Derivative instruments 425 401 15 9 08 Total 11,872 7,106 624 1,956 813 227 1,409

09 31-12-2013 Financial liabilities Maturity structure 2) 10 Interest1), Reported SEK m Currency % amount 2014 2015 2016 2017 2018 2019+ 11 Syndicated credit facility EUR 1.31 1,431 19 1,440 Syndicated credit facility SEK 2.10 222 5 225 12 Credit facility EUR 1.67 760 97 96 94 93 92 352 13 Debenture loan EUR 1.91 2,010 259 256 695 123 655 157 Debenture loan SEK 2.16 230 5 5 231 14 Commercial papers 3) SEK 1.80 3,641 3,657 Leasing, other 13 5 8 2 15 Accounts payable 3,636 3,636 Derivative instruments 36 33 3 16 Total 11,979 7,716 2,033 1,022 216 747 509

17 1) Weighted interest including interest swaps. 2) The duration analysis includes gross flows of loans and interest, including flows from interest swaps. 18 3) Outstanding commercial papers are officially reported under the Group’s Parent Company, Boliden AB.

19 Loan portfolio The average term of the loan facilities on 31st December 2014 was 20 Boliden has syndicated credit facilities totalling EUR 400 million and 3.4 years (2.6 yrs.) and the debt portfolio’s average interest rate EUR 450 million that mature in 2017 and 2019, respectively. The was 1.65 per cent (1.76%). The fixed interest term of outstanding 21 utilised component of the syndicated credit facilities totalled SEK loans, including interest swaps entered into, totalled 0.8 years 1,226 million (SEK 1,653 m) on 31st December 2014. Boliden also (0.7 yrs.) on 31st December 2014. The above maturity analysis has a number of utilised long-term loans from Swedish, Nordic and includes interest flows from interest swaps. 22 European institutions which, as of 31st December 2014, totalled Boliden’s current liquidity in the form of liquid assets and unutilised SEK 3,421 million (SEK 3,000 m) and which mature between 2015 credit facilities with a term in excess of one year totalled SEK 6,356 23 and 2022. Boliden also has an unutilised credit facility of SEK 1,000 million (SEK 6,356 m) on 31st December 2014. million which matures in 2017. A commercial paper for SEK 500 mil- The above maturity structure for the financial liabilities, including 24 lion was also issued in the Swedish capital market during the year and interest payments and accrued interest on derivatives, includes the matures in 2020. SEK 2,514 million (SEK 3,641 m) of Boliden’s undiscounted cash flows that derive from the Group’s liabilities, based 25 commercial papers programme, with a framework of SEK 4,000 mil- on the contracted remaining durations. Interest maturity, including lion, remained outstanding on 31st December 2014. interest swaps, has been calculated on the basis of the applicable 26 closing interest rates.

27

28 Note 27 Financial derivative instruments 29 Boliden uses financial derivative instruments to manage currency rate risks, raw material price risks, and interest rate risks arising 30 within its operations.

31-12-2014 31-12-2013 31 Nominal Nominal Outstanding financial derivative instruments, SEK m amount Fair value amount Fair value Transaction exposure (binding undertakings) Currency futures –3,763 –12 –5,295 34 Raw material derivatives 1,887 –65 121 93 Transaction exposure (forecast cash flows) Currency futures –1,313 –182 –1,533 52 Raw material derivatives –1,168 281 –1,277 292 Interest derivatives –3,497 –19 –5,380 –2 Translation exposure Currency futures –4,896 –22 –1,657 –5 Total –19 464

92 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

Hedge accounting, SEK m 2014 2013 01 Hedging of fair value – Changes in value of hedging instruments in respect of binding undertakings –879 –564 02 – Change in value of hedged item 879 564 03 Ineffectiveness of fair value hedging – 0

Ineffectiveness of cash flow hedging – 1 04

Ineffectiveness of hedging net investments in overseas operations – – 05 Total ineffectiveness 0 1 06 The effect of effective cash flow hedging with regard to Transaction expo- sure on the result for 2014 totals SEK 33 million (SEK 200 m), of which 07 SEK 47 million (SEK 227 m) refers to exchange rate and metal price hedging and SEK –14 million (SEK –27 m) to interest swaps. 08

Currency derivatives in respect of forecast exposure mature in 2015, but the intention is to extend them. Boliden’s other 09 – Cash flow hedging currency risks in respect of forecast exposure are, in every significant A summary of Boliden’s outstanding currency hedging for currency respect, unhedged. For further information about the Group’s trans­ 10 exposure in USD/SEK on 31st December 2014 is shown below. action exposure, see Risk management on page 49. Hedges that refer to forecast exposure between 2016 and 2017 11 Currencies 2015 2016 2017 12 USD/SEK Hedged volume (USD m) 72 70 43 13 Forward rate, USD/SEK 6.77 6.77 6.77 Market value, SEK m –74 –73 –45 14 Total market value, SEK m –191 15

Raw materials derivatives in respect of forecast exposure intention is to extend them. Boliden’s other metal price risks in respect 16 – Cash flow hedging of forecast exposure are, in every significant respect, unhedged. For The table below provides a summary of Boliden’s outstanding price further information about the Group’s transaction exposure, see Risk 17 hedges for gold on 31st December 2014. The hedges that refer to management on page 51. forecast exposure between 2016 and 2017 mature in 2015, but the 18 Metals 2015 2016 2017 19 Gold

Hedged volume (troy oz.) 48,600 47,000 29,000 20 Forward rate, USD/troy oz. 1,489 1,487 1,490 Market value, SEK m 110 105 66 21 Total market value, SEK m 281 22

Offsetting of financial assets and liabilities 23 31-12-2014 31-12-2013 31-12-2014 31-12-2013 24 Gross amount for financial assets 486 526 Gross amount for financial liabilities 505 62 Amount offset in Balance Sheet –81 –26 Amount offset in Balance Sheet –81 –26 25 Net asset reported in Balance Sheet 406 500 Net liability reported in Balance Sheet 425 36 26 Amount comprised by offsetting in Amount comprised by offsetting in conjunction with insolvency, etc. –292 –33 conjunction with insolvency, etc. –292 –33 27 Net asset 114 466 Net liability 133 2 28

29

30 Note 28 Other current liabilities 31 31-12-2014 31-12-2013 Accrued salaries and social security expenses 589 561 Accrued interest expenses 23 22 Other accrued costs and prepaid income 537 380 Other operating liabilities 344 231 1,493 1,194

In the 2013 annual accounts, Other accrued costs and prepaid income included certain accrued payroll expenses. This has been adjusted in 2014 and this Note now includes all accrued payroll expenses under the heading of Accrued salaries and social security expenses. The 2013 comparison year has also been updated.

BOLIDEN ANNUAL REPORT 2014 93 FINANCIAL REPORTING | Notes

01 Note 29 Financial assets and liabilities by valuation category

02 Financial Loan receiv­ Financial ­liabilities 03 Holdings ables and assets Derivatives valued at Total Total Valuation ­valued at accounts ­available used in hedge amortised reported fair 04 31-12-2014 classification fair value receivable for sale accounting cost value value ASSETS 05 Financial fixed assets Other shares and participations 3 26 26 26 06 Current assets 07 Current receivables Accounts receivable 1,344 1,344 1,344 08 Interest-bearing receivables 3 3 3 Derivative instruments 2 26 380 406 406 09 Liquid assets 865 865 865

10 Total financial assets 26 2,212 26 380 – 2,644 2,644 LIABILITIES 11 Long-term liabilities

12 Liabilities to credit institutions 2 4,819 4,819 4,830 Other interest-bearing liabilities 2 19 19 19 13 Current liabilities Liabilities to credit institutions 2 2,845 2,845 2,845 14 Accounts payable 3,764 3,764 3,764 15 Derivative instruments 2 89 336 425 425 Total financial liabilities 89 – – 336 11,447 11,872 11,883 16 Boliden’s entire holding of financial instruments reported at fair value agreements were, on 31st December 2014, adjudged to be on a 17 in the Balance Sheet is classified as level two in the Fair value hierar- par with credit market interest rates, and the fair value therefore chy (see Accounting principles), with the exception of a small amount ­corresponds, in every significant respect, with the reported value. 18 in other shares and participations that is classified as level three. The The reported value of accounts receivable and accounts payable fair value of liabilities to credit institutions is calculated as discounted is held to be the same as the fair value due to the short term to 19 contractually agreed amortisations and interest payments at estim­ matur­ity, to the fact that provision has been made for bad debts, ated market interest rates. The interest covenants of existing loan and to the fact that any penalty interest will be debited. 20 Financial 21 Loan receiv­ Financial ­liabilities Holdings ables and assets Derivatives valued at Total Total 22 Valuation ­valued at accounts ­available used in hedge amortised reported fair 31-12-2013 classification fair value receivable for sale accounting cost value value 23 ASSETS Financial fixed assets 24 Other shares and participations 3 24 24 24

25 Current assets Current receivables 26 Accounts receivable 1,048 1,048 1,048 Interest-bearing receivables 3 3 3 27 Derivative instruments 2 49 451 500 500 Liquid assets 611 611 611 28 Total financial assets 49 1,662 24 451 – 2,186 2,186 29 LIABILITIES Long-term liabilities 30 Liabilities to credit institutions 2 4,346 4,346 4,364 31 Other interest-bearing liabilities 2 4 4 4

Current liabilities Liabilities to credit institutions 2 3,948 3,948 3,948 Other interest-bearing liabilities 2 9 9 9 Accounts payable 3,636 3,636 3,636 Derivative instruments 2 8 28 36 36 Total financial liabilities 8 – – 28 11,943 11,979 11,997

94 BOLIDEN ANNUAL REPORT 2014 FINANCIAL REPORTING | Notes

ings against Apirsa, Boliden BV and Boliden AB in respect of the same Note 30 Pledged assets and contingent liabilities 01 claim. In these proceedings, the local government has itself enjoined the three companies to pay the amount claimed. Apirsa, Boliden BV 02 Parent and Boliden AB appealed the decision to the Administrative Court and The Group Company in late 2011, the Supreme Administrative Court ruled that the local 2014 2013 2014 2013 government’s rulings against and claims against all three of the Boliden 03 Pledged assets companies affected were invalid on formal grounds. The rulings are final and cannot be appealed. In light of the fact that the local govern- 04 For own liabilities and ment’s claims have hence been ruled inadmissible in both civil and ­provisions None None None None administrative courts, the local government has requested a ruling 05 Contingent liabilities by the Supreme Administrative Court on the correct body in which the matter may be heard. The Supreme Administrative Court has, Parent Company sureties – – 7,951 8,609 06 in accordance with this request, ruled that the matter can be heard Other sureties and guarantees 2,235 1,579 133 158 in a civil court of law. The local government’s suit against the above- 07 Pension liabilities 3 3 – – mentioned companies will, therefore, be reopened in the court of the first instance in Seville. Agreed residual values accord- 08 ing to leasing contracts 43 26 – – The companies that were responsible for the design and construc- tion of the dams and against which Apirsa had previously brought suit 2,281 1,608 8,084 8,767 09 and lost have now submitted claims against Apirsa, seeking compen- The Parent Company sureties refer to guarantees issued for subsidiary sation for their legal costs. Final rulings on these compensation companies. SEK 8,084 million (SEK 8,767 m) refer to Parent Company claims will be made by the respective courts of instance. It is currently 10 sureties for external financial borrowing. Parent Company sureties in the not possible to assess with any reasonable degree of certainty above table have been booked in the amount utilised. Guarantees in whether the legal cost claims can be brought against any Boliden 11 respect of unutilised credits total SEK 7,851 million (SEK 9,706 m). company other than Apirsa. The possibility exists, in addition to the above specifications under Based on the legal advice and opinions given by the company’s Spanish 12 the heading of contingent liabilities and the items included in the finan- legal counsel, Boliden’s overall view is that the company will not suffer any cial information, that the Group may incur environmentally-related substantial financial damage as a result of the legal proceedings 13 contingent liabilities or contingent liabilities attributable to legal pro- described. The company has made no provision, pending a final ruling. ceedings and claims which cannot be currently calculated but which 14 may, in future, entail costs or investments. Summons arising from the export of metallic residues to Chile in the 1980s 15 Legal proceedings In October 2013, suit was brought against Boliden claiming damages Overview for the arsenic poisoning suffered by claimants from the Chilean town 16 Boliden conducts extensive domestic and international operations and of Arica to which Boliden exported metallic residues from the is occasionally involved in disputes and legal proceedings arising in the Rönnskär smelter between 1984 and 1985 for processing by a Chil- course of these operations. These disputes and legal proceedings are ean company, Promel. The suit was brought by a Swedish limited part- 17 not expected, either individually or collectively, to have any significant nership, Arica Victims KB. The claim comprises approximately 800 negative impact on Boliden’s operating profits, profitability or financial people and is for a combined total of just over SEK 105 million plus 18 position, over and above that detailed below. interest. Boliden has contested the claim and is of the opinion, over- all, that the company will not suffer any substantial financial loss as a 19 Disputes result of the legal process described. The company has made no pro- Disputes arising from the dam breach accident in Spain vision, pending a final ruling. 20 In April 1998, a dam breach occurred in a tailings pond at the Los Frailes mine in Spain, which was then owned by Boliden’s subsidiary, Dispute arising from the former copper tubing cartel 21 Boliden Apirsa S.L. (“Apirsa”). Following the dam breach, preliminary In June 2012, Boliden was served with claims in the UK courts by a investigations in a criminal case were initiated against Apirsa and its number of companies in the Travis Perkins corporate group. Travis 22 representatives.­ In December 2000, the investigations were closed. The Perkins claimed to have sustained losses as a consequence of the ruling was appealed but finally ratified in November 2001. The criminal­ copper tubing cartel in which Boliden and seven other companies 23 proceedings determined that the accident was caused by design and were involved during the period from June 1988 to March 2001, and construction errors in the dam, not by Apirsa’s operations at the mine. for which the companies concerned were fined by the European Com- 24 The outcome of the criminal proceedings notwithstanding, the Spanish mission in 2004. The parties have agreed a final mediated settlement Ministry of the Environment declared Apirsa liable to pay an amount cor- during the year and the legal proceedings have been terminated. responding to approximately EUR 45 million in clean-up costs, damages 25 and fines. This resulted, in January 2005, in Apirsa initiating insolvency Diesel tax at Aitik proceedings in order to ensure a coordinated and orderly closure of the During the period from April 2009 to October 2012, dyed diesel was 26 company. The receivers in bankruptcy have, within the framework of the incorrectly used at Aitik instead of undyed diesel. The two versions insolvency proceedings, requested that Apirsa’s parent company, Boliden carry different tax rates. When the mistake was discovered in Octo- 27 BV, together with Boliden Mineral AB and Boliden AB, be held liable for ber 2012, Boliden immediately contacted both the supplier, in order Apirsa’s shortfall in an amount which, according to the receivers in bank- to switch to undyed diesel, and the Swedish Tax Agency, in order to 28 ruptcy, totals approximately EUR 141 million, including a yet untested inform them of what had happened. The Swedish Tax Agency imposed claim of approximately­ EUR 89 million which the local government (Junta an energy tax liability totalling SEK 212 million, plus interest, on 29 de Andalucía) believes it is owed, as described in greater detail below. Boliden, which ruling has now been confirmed by the Administrative As a result of the dam breach, the local government sued Apirsa, Court. Boliden has appealed to the Administrative Court of Appeal 30 Boliden BV and Boliden AB in a civil court for damages totalling approx­ and has submitted a request for a reduction in/remission of the tax imately EUR 89 million. The suit was dismissed on formal legal grounds. to the Government on the grounds that tax has been paid in accord- 31 The ruling was appealed, but the appeal was rejected by a higher court ance with the legislator’s intention. Boliden has paid the energy tax in the autumn of 2003. Since the dismissal of the suit in the civil court, sanction (SEK 156 million after a review of the company’s income tax) the local government in Andalucía has initiated administrative proceed- but has made no provision, pending a final ruling.

Note 31 Events after 31st December 2014

The EU Sulphur Directive The EU Sulphur Directive, which comes into road freight via ferries, with indirect costs accounting for the other half force on 1st January 2015, means that the sulphur content of the fuel of the increase. used in ships trafficking the Baltic Sea, the North Sea, and the English Channel must be reduced to 0.1 per cent from 1.0 per cent. Boliden Tax On Diesel In Sweden The increase in the tax on diesel for mining calculates that these more stringent requirements will entail an annual operations in Sweden that comes into force on 1st January 2015 cost increase of approximately SEK 100 million, half of which will com- will entail an annual cost increase for Boliden of approximately prise higher direct costs for the company’s own maritime freight and SEK 40 million.

BOLIDEN ANNUAL REPORT 2014 95 FINANCIAL REPORTING | Proposed allocation of profits Proposed allocation of profits

The Board’s proposed allocation of profits for 2014 The Annual Accounts have been prepared in accordance with generally and statement in accordance with the Swedish accepted accounting principles in Sweden and the Consolidated Companies Act, 18:4 Accounts have been prepared in accordance with EU-approved Inter­ Boliden has a dividend policy whereby approximately one third of the national Financial Reporting Standards, IFRS. profit after tax is to be distributed. The Board of Directors proposes that The Annual Accounts and the Consolidated Accounts give a true the Annual General Meeting approve payment of a dividend of SEK and fair view of the Parent Company’s and the Group’s financial 2.25 (SEK 1.75) per share, or a total of SEK 615 million (SEK 479 m), ­position and results of operations. corresponding to 32.4 per cent of the profit after tax for 2014. The The Directors’ Report for the Group and the Parent Company give Parent Company’s non-restricted shareholders’ equity totals SEK 6,424 a true and fair overview of the Group’s and the Parent Company’s million and the Group’s total shareholders’ equity is SEK 23,974 mil- ­operations, position and results and describes the material risks and lion. The non-restricted shareholders’ equity in the Parent Company uncertainties faced by the Parent Company and the companies that and the Group will total SEK 5,809 million and SEK 23,359 million, make up the Group. respectively, after payment of the proposed dividend to the shareholders. The Board has taken the cyclic nature of the industry and the risks ­associated with the operations into account in its dividend proposal.

Stockholm, 12th February 2015

Anders Ullberg Chairman

Marie Berglund Staffan Bohman Tom Erixon Member of the Board Member of the Board Member of the Board

Lennart Evrell Michael G:son Löw Ulla Litzén President & CEO Member of the Board Member of the Board

Leif Rönnbäck Roland Antonsson Marie Holmberg Member of the Board Employee Representative Employee Representative

Kenneth Ståhl Employee Representative

Our Audit Report was submitted on 19th February 2015

Ernst & Young AB

Helene Siberg Wendin Authorised Public Accountant

96 BOLIDEN ANNUAL REPORT 2014 | DIRECTORS’ REPORT FINANCIAL REPORTING | Auditor’s report Auditor’s report

To the Annual General Meeting of the shareholders and of its financial performance and its cash flows for the year then of Boliden AB (publ.), corporate identity number: ended in accordance with the Annual Accounts Act. The consolidated 556051-4142 accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of Report on the annual accounts and consolidated the Group as of 31st December 2014 and of their financial performance accounts and cash flows for the year then ended in accordance with International We have audited the annual accounts and consolidated accounts of Financial Reporting Standards, as adopted by the EU, and the Annual Boliden AB (publ.) for 2014. The annual accounts and consolidated Accounts Act. The statutory administration report is consistent with the accounts of the company are included in the printed version of this other parts of the annual accounts and consolidated accounts. ­document on pages 6–20, 26–51 and 64–96. We therefore recommend that the annual meeting of the shareholders adopt the income statement and balance sheet for the parent company Responsibilities of the Board of Directors and the and the group. Managing Director for the annual accounts and consolidated accounts Report on other legal and regulatory requirements The Board of Directors and the Managing Director are responsible for the In addition to our audit of the annual accounts and consolidated preparation and fair presentation of the annual accounts in accordance accounts, we have examined the proposed appropriations of the com­ with the Annual Accounts Act and of the consolidated accounts in accord- pany’s profit or loss and the administration of the Board of Directors ance with International Financial Reporting Standards, as adopted by the and the Managing Director of Boliden AB (publ.) for 2014. EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to Responsibilities of the Board of Directors and the enable the preparation of the annual accounts and consolidated accounts Managing Director that are free from material misstatement, whether due to fraud or error. The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss, and the Board of Directors and the Managing Auditor’s responsibility Director are responsible for administration under the Companies Act. Our responsibility is to express an opinion on the annual accounts and consolidated accounts based on our audit. We conducted our audit in Auditor’s responsibility accordance with the International Standards on Auditing and generally Our responsibility is to express an opinion with reasonable assurance on accepted auditing standards in Sweden. These standards require that we the proposed appropriations of the company’s profit or loss and on the comply with professional ethical requirements and plan and perform the administration, based on our audit. We conducted the audit in accord- audit to obtain reasonable assurance about whether the annual accounts ance with generally accepted auditing standards in Sweden. and consolidated accounts are free from material misstatement. As a basis for our opinion on the Board of Directors’ proposed appro- An audit involves performing procedures to obtain audit evidence about priations of the company’s profit or loss, we examined the Board of the amounts and disclosures in the annual accounts and consolidated Directors’ reasoned statement and a selection of supporting evidence in accounts. The procedures selected depend on the auditor’s judgement, order to be able to assess whether the proposal is in accordance with the including the assessment of the risks of material misstatement of the Companies Act. annual accounts and consolidated accounts, whether due to fraud or error. As a basis for our opinion concerning discharge from liability, in addi- In making those risk assessments, the auditor considers internal control tion to our audit of the annual accounts and consolidated accounts, we ­relevant to the company’s preparation and fair presentation of the annual examined significant decisions, actions taken and circumstances of the accounts and consolidated accounts in order to design audit procedures company in order to determine whether any member of the Board of that are appropriate in the circumstances, but not for the purpose of Directors or the Managing Director is liable to the company. We also expressing an opinion on the effectiveness of the company’s internal con- examined whether any member of the Board of Directors or the Manag- trol. An audit also includes evaluating the appropriateness of the account- ing Director has, in any other way, acted in contravention of the Com­ ing policies used and the reasonableness of accounting estimates made by panies Act, the Annual Accounts Act, or the Articles of Association. the Board of Directors and the Managing Director, as well as evaluating the We believe that the audit evidence we have obtained is sufficient and overall presentation of the annual accounts and consolidated accounts. appropriate to provide a basis for our opinions. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinions We recommend to the annual meeting of the shareholders that the profit Opinions be appropriated in accordance with the proposal in the statutory admin- In our opinion, the annual accounts have been prepared in accordance istration report and that the members of the Board of Directors and the with the Annual Accounts Act and present fairly, in all material respects, Managing Director be discharged from liability for the financial year. the financial position of the parent company as of 31st December 2014

Stockholm, 19th February 2015

Ernst & Young AB

Helene Siberg Wendin Authorised Public Accountant

BOLIDEN ANNUAL REPORT 2014 97 Boliden’s corporate governance is designed to ensure that the shareholders’ best interests are safeguarded and that confidence in the company is maintained.

Contents Corporate Governance Report 100 The Board of Directors 104 The Group management 107 Mineral reserves and mineral resources­ 109 Definitions 113 Industry concepts and explanations 114 Ten-year overview – The Group, incl. sustainability-related key ratios 115 Ten-year overview – Mines 116 Ten-year overview – Smelters 119 2015 Annual General Meeting and addresses 121 Large volumes are transported to, from, forecasts suggest that by 2050, this within and between Boliden’s units every figure will have risen to 65 per cent. year. The biggest vehicles are the ore In 2014, Boliden manufactured trucks used at the Aitik copper mine, 468,000 tonnes of zinc, 347,000 ton- each one of which can carry over 300 nes of copper, 25,000 tonnes of lead, tonnes. Boliden’s mined concentrate, raw 17 tonnes of gold and 620 tonnes of materials and finished metals are, how­ ­silver. These metals are vital in the ever, largely transported by sea and rail. ­development of new infrastructure and Global metal demand is increasing as more efficient technology required for more and more countries lift themselves energy supplies, digital communication, out of poverty. In 2014, just over half of and transport systems such as buses the world’s population lived in cities and and trains. Corporate Governance Report Corporate Governance Report

Efficient corporate governance is a prerequisite for gen- One of the prerequisites for value-generating work by the Board is that the erating added value for our shareholders and maintaining Board has a firm grasp on the operations and on events in the outside confidence amongst our stakeholders at large. world. We achieve this by, amongst other things, monthly reports and a well-structured body of material for the Board. We also usually visit two of Boliden’s operating facilities each year in order to learn about those opera- A group, essentially comprising Swedish institutional investors, have held tions in real depth and to meet with the local management and employees. their shareholding and been long-term owners in Boliden since we were In addition, in order to ensure that we spend sufficient time on the more relisted in Sweden almost 15 years ago, but there is no clear principal forward-looking issues, we agree every year on a number of themes that we owner. This places special demands on the Board as the owners’ ambitions incorporate into our Board agenda. The Corporate Governance Report must be “interpreted”. details the themes we have addressed during the past year. Some of them We work in an industry that is characterised by high volatility, i.e. rapid are recurring themes, e.g. CSR issues, which we address specifically at our and vigorous fluctuations – both up and down – in profits, and this is some- October meeting, and leadership development, which is the focus of our thing that our shareholders must understand. The volatility also makes sig- December meeting. nificant demands on the company’s management and Board in terms of their The evaluation of the Board’s work that we carried out in 2014 shows ability to handle these rapid changes without suffering either from hubris that the Board is functioning efficiently. This evaluation forms the basis for when the trend is upwards or dejection when the trend is downwards. the work of the Nomination Committee and it is an important tool for the The Board of Directors and the management must, at the same time, Board’s efforts to ensure continuous improvement in our work. successfully handle large and long-term investment projects, such as the upscaling of our Garpenberg operations. The decision to invest almost SEK February 2015 4 billion in this project was taken by the Board in January 2011 and the investments in the mine and concentrator were put into use in 2014 and will influence our operations for many years to come. This type of project naturally also entails a large number of risks, which are discussed over a rel- atively long period of time by the Board before any decision is taken, and Anders Ullberg are vital in terms of value generation within the company. Chairman of the Board

Governance of the Boliden Group • NOK 350 million investment approved in increasing capacity at the Boliden is a Swedish limited company listed on the NASDAQ Stockholm Odda zinc smelter in Norway from 170 to 200 Ktonnes of zinc per year Stock Exchange (NASDAQ Stockholm). The Boliden Group has approx­ • In-house nickel smelting operations, with an annual production rate of imately 4,900 employees and runs mines and smelters in Sweden, Finland, 25 Ktonnes of nickel matte, approved Norway and Ireland. Boliden’s sales offices in Sweden, Denmark, the UK and Germany handle sales and/or marketing of raw materials, metals and Shareholders and Annual General Meeting by-products. Boliden’s corporate governance is based on the Swedish Boliden’s biggest shareholders are Swedish and foreign investment funds Annual Accounts Act, the Swedish Companies Act, NASDAQ Stock- and institutions. There were a total of 77,965 (90,963) shareholders at the holm’s regulations for issuers, the Swedish Code of Corporate Governance, end of 2014 and the biggest single shareholders were Norges Bank Invest- and other applicable legislation and regulations. ment Management, Blackrock Inc, SHB fonder, Swedbank Robur fonder In addition to compliance with rules and regulations, Boliden applies and AFA försäkring. The percentage of foreign ownership increased dur- internal governance instruments, such as the Group’s organisational and ing the year, reaching approximately 59 per cent (41%) by the end of the operational philosophy, the New Boliden Way, and Boliden’s internal con- year. For further information on the shareholder structure within trol tool, BICS, together with policies in a number of areas such as Boliden, see pages 6–7 of the Annual Report and Boliden’s website. Boliden’s Code of Conduct with which all employees must be familiar and Boliden’s shareholders exercise their right of decision by submitting pro- in accordance with which they must conduct themselves. The Group’s posals to and participating in and voting on the proposals submitted to the units also work in accordance with health & safety, environmental, energy, Annual General Meeting and any Extraordinary General Meetings. Share- and quality management systems. holders may request that a matter be discussed at the Annual General Meeting by submitting a written request to the Board of Directors at the Highlights and events during 2014 designated time that is sufficiently in advance of the meeting that the mat- Boliden has continued its focus on expansion through organic growth ter can be included in the notice convening the meeting. Shareholders are and acquisitions in 2014. The most important events during the year also welcome to submit enquiries to the Board and the President, Auditors have included: or Committee Chairmen during the General Meeting. • Issue of 6-year bond loan for SEK 500 million The Annual General Meeting is the company’s supreme decision-mak- • Refinancing of syndicated credit facility for EUR 850 million ing body. The duties of the Annual General Meeting include the election • Raising of a new 7-year loan for SEK 570 million with the Swedish of Members of the Board, the Chairman of the Board, the Nomination Export Credit Corporation Committee, the adoption of the Income Statement and Balance Sheet, res- • Exploitation concession application for Laver submitted olutions on the appropriation of profits and discharge from liability for the • SEK 600 million investment approved, enabling the first steps to be Members of the Board and the President of the company, the determina- taken in an expansion of the Aitik mine to 45 Mtonnes of ore per year tion of fees payable to the Members of the Board and to the auditors and • Settlement of dispute with Travis Perkins, et al, arising from the former the principles governing conditions of employment and remuneration for copper tubing cartel the President and senior executives, and, where relevant, the amending of • Ongoing action programme designed to stabilise production and Articles of Association and the election of auditors. cut costs at Rönnskär • Acquisition of the Kylylahti mine and associated exploration rights The 2014 Annual General Meeting in Finland The Annual General Meetings are regularly held at one of Boliden’s facilities­ • Garpenberg expansion to 2.5 Mtonnes of ore per year inaugurated in Sweden in order to give the shareholders an insight into the operations. and production commenced Shareholders are offered the chance of a guided tour of Boliden’s mines, • Breakdown in leaching tank at Kokkola concentrators or smelters in conjunction with some meetings in order to

100 BOLIDEN ANNUAL REPORT 2014 Corporate Governance Report

deepen their knowledge of the operations and to give them an opportunity resolutions passed by the 2014 Annual General Meeting are included in the to meet with Boliden’s employees. The 2014 Annual General Meeting was Minutes of the Meeting published on Boliden’s website, where the minutes held on 6th May in Boliden and the theme of the meeting was 90 Years of of previous Annual General Meetings are also published. Knowledge. Attendees were given the opportunity, amongst other things, The 2015 Annual General Meeting will be held on 5th May in to learn about the way exploration work was conducted at the beginning Garpenberg. of the 20th century and how it is now done, to visit the tellurium plant, and to view exhibitions covering such areas as metallurgical progress. Nomination Committee 97,924,442 shares were represented at the meeting by 693 shareholders, The Nomination Committee represents Boliden’s shareholders and is tasked either in person or through their proxies. The shares represented com- with preparing and presenting proposals for resolutions that Boliden’s share- prised approximately 36 per cent of the total number of shares. The meet- holders vote on at the Annual General Meeting. The proposals relate to, ing was attended by all Members of the Board and members of the Group amongst other things, the election of Members of the Board, the Chairman management, and the auditor in charge. of the Board, fees payable to the Board and its committees, election of and The Meeting resolved, amongst other things, to re-elect all of the Mem- fees payable to the company’s auditors, and to the process and the criteria bers of the Board and to re-elect Anders Ullberg as the Chairman of the that shall govern the appointment of the members of the Nomination Com- Board. The Meeting further resolved: mittee ahead of the next Annual General Meeting. • To pay a dividend of SEK 1.75 per share, totalling SEK 479 million, The focus of the Nomination Committee’s work is on ensuring that the in accordance with the proposal by the Board of Directors; company’s Board of Directors comprises Members who, collectively, pos- • That the following persons shall be appointed as members of the Nomi- sess the knowledge and experience that corresponds to the standards that nation Committee: Hans Ek (SEB Investment Management), Lars-Erik Boliden’s shareholders require of the company’s most senior governing Forsgårdh, Frank Larsson (Handelsbanken Fonder), Anders Oscarsson body. The Chairman of the Board accordingly presents the Nomination (AMF) and Anders Ullberg (Chairman of the Board); Committee with the evaluation conducted of the work of the Board and • That Directors’ fees payable and fees payable to the Committees shall, in the individual Members during the past year as part of the process of draft- accordance with the proposal by the Nomination Committee, comprise ing proposals for Board Members. The Company President also presents a Director’s fee of SEK 1,200,000 to the Chairman of the Board, and of Boliden’s operations and future orientation. The Nomination Committee SEK 460,000 to Members who are not Boliden employees, that the fees is also afforded the opportunity to meet the Members of the Board. The payable to the Chairman of the Audit Committee and to each of the Nomination Committee also drafts proposals for the election of auditors. two members of the Audit Committee shall be SEK 150,000 and SEK Shareholders can submit proposals to the Nomination Committee in 75,000, respectively, and that the fees payable to each of the Remunera- accordance with the instructions presented on Boliden’s website. tion Committee’s two members shall be SEK 50,000; The Annual General Meeting passes resolutions on the principles gov- • To re-elect Ernst & Young AB as the company’s auditors for the period up erning the appointment and duties of the Nomination Committee. The to and including the next Annual General Meeting, in accordance with Nomination Committee shall, in accordance with the Instructions for the the proposal by the Nomination Committee, and that auditors’ fees Nomination Committee, comprise a minimum of five and a maximum of shall be payable in accordance with the approved invoices received. seven members. Five members shall be elected at the Annual General Meeting, of whom three shall represent the biggest shareholders and one The Annual General Meeting also resolved to approve the proposed princi- the smaller shareholders, and one of whom shall be the Chairman of the ples for remuneration to the Group management whereby the remuneration Board. The Nomination Committee may, in order better to reflect the shall comprise a fixed salary, any variable remuneration, other benefits and shareholder structure in the event of changes in ownership, offer places on pensions. The variable remuneration shall be maximised at 60 per cent of the the Committee to other larger shareholders. The Nomination Committee fixed salary for the President and maximised at 50 per cent of the fixed salary appoints its own Chairman and works in the best interests of all share- for other senior executives and shall be based on results in relation to targets holders. The members of the Nomination Committee receive no remu- set. The variable remuneration shall not entitle to pensionable income. The neration for their work.

Boliden’s Corporate Governance Structure

SHAREHOLDERS NOMINATION COMMITTEE Approximately 80,000 shareholders. Comprises between five and seven Exercise control via the Annual General members. Submits proposals to the Meeting and, where relevant, Extraordi- Annual General Meeting with regard to AUDITORS nary General Meetings. Board Members, etc. Elected by the Annual General Meeting.­ Review the accounts, bookkeeping and the administration by the Board of Directors and the President. BOARD OF DIRECTORS Consists of eight Members elected by Remun. Committee (two members) the Annual General Meeting and three Members and three Deputies appointed Audit Committee (three members) by the trade union organisations.

PRESIDENT/CEO AND INTERNAL CONTROL FUNCTION GROUP MANAGEMENT Reports to the Chief Financial Officer and The President leads the operations with Finance function and presents reports the support of the other four members on issues relating to internal control at of the Group management. the Audit Committee’s meetings.

BOLIDEN ANNUAL REPORT 2014 101 Corporate Governance Report

The Board of Directors’ work cycle, 2014

Recurring business: Sustainability and health & safety issues, operational reviews, investments, cost accounting, theme items.

Year-end Report, Annual Report, Auditors’ Report, agenda items Q2 Interim Report, Auditors’ Strategy, budget and busi- for the Annual General Meeting, mineral reserves and mineral Report, strategic orientation for ness plan, leadership devel- resources, deposit development, comparisons between explora- Smelters, Rönnskär’s environmen- opment, managerial evalua- tion and acquisitions, reclamation, risk management dams, tal permit and deep storage, tion, ongoing replacement report from auditors, and meetings between the Board and the investments and international and capacity enhancing auditors without the presence of the Group management trade sanctions investments

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Q1 Interim Report, following up on the Decision Q3 Interim Report, acquisition of Kylylahti, strategic orienta- Rönnskär action programme, Aitik 45, iron to acquire tion for Mines, substitution risks for Boliden’s metals, cost- and steel vs. base metals, refinancing of Kylylahti cutting in purchasing, effects of changes to environmental loans and issue of bond loans legislation, operational risks, disputes, follow up on the New Boliden Way, Corporate Responsibility (CR), new nickel strat- Annual General Meeting and Statutory egy and expansion investment at Odda Board Meeting

The work of the Nomination Committee in 2014 Boliden’s Board of Directors shall, under the provisions of the Articles of Hans Ek (SEB Investment Management), Lars-Erik Forsgårdh, Frank Association, comprise a minimum of three and a maximum of ten Mem- Larsson (Handelsbanken Fonder), Anders Oscarsson (AMF) and Anders bers, without Deputy Members, elected by the Annual General Meeting. Ullberg (Chairman of the Board) were elected to the Nomination Com- The company’s employees have a statutory entitlement to appoint three mittee at the 2014 Annual General Meeting. The Nomination Committee Members and three Deputy Members to the Board. The Board of Directors, has exercised its mandate to invite two new members on to the Committee which is elected for one year at a time, has comprised eight Members in order better to reflect Boliden’s shareholder structure, namely Anders elected by the Annual General Meeting and three Members appointed by Algotsson (AFA Försäkring) and Jan Andersson (Swedbank Robur fonder). the trade union organisations since the 2014 Annual General Meeting. In November, the Chairman of the Board convened the members of the The Board Meetings are attended both by the ordinary Members and by Committee, at which time, Jan Andersson was appointed Chairman of the union’s three Deputy Members. The General Counsel Group Legal the Nomination Committee. The current composition of the Nomination Affairs is the Board’s Secretary. Boliden’s Chief Financial Officer (CFO) Committee is also shown on Boliden’s website. The Nomination Com­ also usually attends the Meetings on behalf of the Group management. mittee has met a total of three times impending the 2015 Annual General Other members of the Group management and other executives also Meeting and has also had telephone contacts with and held meetings with attend and present reports on individual issues as required. both the Members of the Board and the President. These contacts afford The Board Members elected by the Annual General Meeting are all to the Nomination Committee an excellent opportunity to form an opinion be regarded as independent in relation to major shareholders and all, with of the way in which the Chairman of the Board and the individual Members the exception of the President, are to be regarded as independent in rela- of the Board view the work of the Board, of the executive management, tion to the company and the Group management. The Board conse- and of the way in which they view Boliden’s operations and the challenges quently complies with the requirements of the Code with regard to inde- faced by the company in the next few years. pendent Members. The Members of the Board are presented on pages The Nomination Committee endeavours to ensure an even gender distri- 104–105 and on Boliden’s website. bution amongst the Board Members and the Nomination Committee also The Board sets the company’s financial goals and strategy, appoints and prioritises, in parallel with its efforts to achieve this goal, to ensure a multifa­ evaluates the President and CEO, and ensures that efficient systems are put ceted and broad composition that covers relevant areas with regard to exper- in place for following up on and monitoring operations, that the company tise, experience and background. Boliden’s operations, developmental phase complies with statutory and regulatory requirements, and that information and future orientation are important criteria in evaluating skill requirements is published in a correct and transparent manner. The Board adopts a For- and analyses aimed at determining the optimum composition of the Board. mal Work Plan every year at the Statutory Board Meeting, held after the One of the main issues addressed by the Nomination Committee in Annual General Meeting. The Formal Work Plan regulates the work and 2014, in addition to the above-mentioned duties such as the evaluation of responsibilities of the Board in greater detail, together with the special the composition of the Board and proposals for the impending Annual Gen- duties with which the Chairman of the Board is tasked. eral Meeting, has been the procurement of a new auditor for Boliden. The Chairman of the Board guides the work of the Board and the Mem- The Nomination Committee’s proposals for submission to the 2015 bers and establishes an open and constructive dialogue. The Chairman’s Annual General Meeting will be published in the impending notice con- duties also include monitoring and evaluating the expertise and work of vening the Annual General Meeting and on Boliden’s website. the Board Members and the contribution they make to the Board as a whole. Another important component of the Chairman’s work – particu- The Board of Directors larly in Boliden where there is no clear principal shareholder – is monitor- The Board of Directors is appointed by Boliden’s owners to bear ultimate ing the operations through an ongoing dialogue with the President. The responsibility for the company’s organisation and the management of the Chairman of the Board acts as a discussion party and source of support for company’s affairs in the best interests of both Boliden and the sharehold- the President and ensures implementation of and compliance with the ers. This shall be done in a sustainable way that entails carefully balanced Board’s decisions, instructions and directives. Prior to every Board Meet- risk-taking, in order to ensure that the company’s long-term developmen- ing, the Chairman and the President review the issues to be discussed at the tal trend is a positive one. meeting. The supporting documents for the Board’s discussion of the

102 BOLIDEN ANNUAL REPORT 2014 Corporate Governance Report

issues is sent to the Members approximately one week before each Board Committee. The evaluation is carried out by the Board itself under the Meeting. The division of labour between the Board of Directors and the guidance of the Chairman or, occasionally, with the help of an independ- President is clarified in the written “Instructions to the President” adopted ent consultant. The 2014 evaluation was a self-assessment during which by the Board at the Statutory Board Meeting. the Members answered a number of questions in writing on a range of dif- ferent subjects and held one-on-one discussions with the Chairman of the The Board of Directors’ work in 2014 Board, followed by a joint discussion, during which the Board discussed The Board of Directors held seven meetings in 2014, including the Statutory the conclusions drawn from the evaluation. Board Meeting. A number of the Board Meetings are regularly held at the company’s operating units in order to give the Members an increased insight The Board’s Committees into the operations. In 2014, the Board visited Rönnskär and the Boliden The overall responsibility of the Board of Directors cannot be delegated Area in conjunction with the Annual General Meeting and the Board Meet- but the Board may, within itself, set up committees which prepare, follow ings in May, and the Kokkola smelter and the Kylylahti mine in Finland, up on and evaluate issues within their respective spheres ahead of decisions which was acquired in 2014. A number of Members also attended the inaug­ by the Board. The Board has, accordingly and as in previous years, set up uration of the Garpenberg expansion in August 2014. an Audit Committee and a Remuneration Committee in 2014. The Com- The Board receives ongoing information on Boliden’s commercial and mittees’ members are appointed at the Board Meeting following election financial performance and updates on Boliden’s fulfilment of its sustainability held after the Annual General Meeting and their work is governed by the goals in the form of monthly reports and at Board Meetings. Every Board Committees’ formal work plans and instructions. Meeting consequently begins with a review of the operations, of the current health & safety position, and of sustainability issues. The Board also, at the Audit Committee beginning of the year and in addition to these and other customary opera- The Audit Committee prepares a number of issues for consideration by the tions-related issues, sets a number of themes that it particularly wishes to Board and thereby supports the Board in its endeavours to fulfil its respons­ address during the year in order to create an increased understanding of ibilities within the areas of auditing and internal control and with assuring Boliden’s opportunities and challenges from a broader perspective. The Board the quality of Boliden’s financial reporting. Boliden has an internal control has accordingly discussed such issues during the year as Boliden’s position function whose work involves mapping risk areas and following up on within its sector, the global trend in the metals market, demand for Boliden’s work in identified areas, amongst other things. The Committee also works products, readiness to handle harsher market conditions, measures to counter with the procurement of services from the company’s auditors in addition cost increases, iron mines and steelworks vs. base metals, exploration and to the actual auditing services and, when so tasked by the Nomination acquisitions, and CSR issues in the mining industry in other countries. Committee, with the procurement of auditing services. The Audit Com- Boliden’s strategy is to work continuously with measures that will mittee meets before the publication of every financial report, and as neces- enhance efficiency, and expansions and acquisitions mean that these and sary. The Audit Committee comprises Ulla Litzén (Chairwoman), Leif related issues account for a substantial and significant component of the Rönnbäck and Anders Ullberg. The Committee members have specialist Board’s work. Suitable acquisition objects are accordingly monitored on a competence, experience of and interest in financial and accounting issues rolling basis and in 2014, the Board decided to acquire a mine and its asso- – see Directorships and previous positions, pages 104–105. The Commit- ciated exploration rights with interesting potential in Finland (Kylylahti). tee’s meetings are also attended by Boliden’s CFO and the Director of Organic growth, which has contributed to Boliden’s success, continues to Internal Control. The Committee met six times in 2014. Special attention be prioritised and new business opportunities within the framework of was paid in 2014 to the auditors’ reviews, the status of internal controls, IT existing operations are constantly being evaluated. A number of new security, the acquisition of Kylylahti and the procurement of audit services. expansion investments and a partially new nickel strategy have been The Audit Committee works on the basis of a set of “Instructions for the approved in line with this approach. The change in the nickel smelting Audit Committee” adopted every year by the Board of Directors and business model at Boliden Harjavalta in Finland will see nickel concentrate reports back to the Board on the results of its work. bought in from external suppliers and nickel matte sold on the global mar- ket. Other important expansion decisions in 2014 included the first stages Remuneration Committee in enabling a future expansion of Aitik’s production from 36 (38 in 2014) The Remuneration Committee submits proposals for resolution by the to 45 Mtonnes of ore per year and investments designed to increase capa­ Board regarding salary and other terms of employment for the President, city at the Odda zinc smelter in Norway from 170 to 200 Ktonnes of zinc and follows up on and evaluates programmes for variable remuneration for per year. Previously approved expansion projects ongoing in 2014, such as the management. The Committee also approves proposals regarding salaries Garpenberg, silver extraction at Kokkola, and the construction of deep and other terms of employment for the Group management, as proposed storage facilities at Rönnskär, have been the subject of ongoing monitoring by the President. The Remuneration Committee is, furthermore, tasked and follow-up work, as has the ongoing action programme designed to with submitting proposals regarding remuneration principles for the Presi- improve process stability and cost-effectiveness at the Rönnskär smelter. dent and Group management – proposals which are then submitted by the Work on improving and coordinating health & safety issues have been Board to the Annual General Meeting for resolution. The application of the subject to continuous monitoring and follow-up work by the Board in guidelines and relevant remuneration structures and levels within the com- response to the negative shift in the accident frequency rate in 2013. A com- pany is also followed up by the Committee and the results of this evaluation prehensive action package has been drawn up with the aim of turning this are published on the company’s website. See Note 3 on pages 78–79 for an trend around in accordance with the more detailed presentation provided account of the remuneration paid to the Group management. under the Sustainability governance in Boliden heading on page 106. The Remuneration Committee works on the basis of a set of “Instruc- Efficient and suitable licensing processes and reasonable operating con- tions for the Remuneration Committee” adopted every year by the Board ditions are, in light of the nature of Boliden’s operations, important issues of Directors and reports back to the Board on the results of its work. The for the company and its Board, and are the subject of recurring discus- Remuneration Committee comprises Anders Ullberg (Committee Chair- sions. The Board has also addressed a related area, namely CSR, business man), and Staffan Bohman. The Committee has held two meetingsduring ­ ethics and moral considerations, and has focused on issues such as anti- the year and had telephone contact on a number of occasions. corruption and trade sanctions. The refinancing of syndicated loan facilities, the issue of a 6-year bond loan listed on the NASDAQ Stockholm, and the raising of a 7-year loan with the Swedish Export Credit Corporation, were all approved and implemented during the year. The Chairman ensures that the Board and its work are evaluated annu- ally and that the results of the evaluation are conveyed to the Nomination

BOLIDEN ANNUAL REPORT 2014 103 Board of Directors Board of Directors

Name Anders Ullberg Marie Berglund Staffan Bohman Tom Erixon Chairman of the Board Member of the Board Member of the Board Member of the Board Position – Vice President, Raw Materials – President and CEO of Ovako. and Environment, NCC Roads. Education M.Sc. Economics M.Sc. Biology M.Sc. Economics LL.B., MBA. Elected 2005 2003 2007 2013 Born 1946 1958 1949 1960 Directorships Chairman of the Boards of Member of the Boards of Chairman of the Boards of Member of the Boards of BE Group, Eneqvist Consulting, Baltic Sea 2020, Eurocon Höganäs and Cibes LiftGroup. ­Jern­kontoret, Stål & Metall Natur&Kultur and Studsvik. ­Consulting, the Water Delega- Deputy Chairman of the Boards and Chinsay. Member of the Boards of tion of the Gulf of Bothnia’s of Rezidor Hotel Group and of Atlas Copco, Beijer Alma, Water District, the Advisory the SNS – Centre for Business Norex, Valedo Partners and Council of the County Admin­ and Policy Studies Board of Åkers. Chairman of the istrative Board of Väster­ Trustees. Member of the Boards Swedish Financial Reporting norrland. of Atlas Copco, Ratos, Rolling Board. Optics and the Swedish Corpo- rate Governance Board.

Previous CFO of Svenska Varv. CFO, Group Ecologist in the former CFO at Alfa Laval, CEO of Managing partner Boston ­positions Vice President and President MoDo Group, Environmental DeLaval, Gränges and Sapa. ­Consulting Group, and a and CEO of SSAB. Manager of Botniabanan AB, variety of senior positions President of BioEndev (con­ within Sandvik. sultant).

Shareholding1) 45,000 1,000 40,000 0 Meetings 7 of 7 7 of 7 6 of 7 7 of 7 attended Committee work Audit Comm. Remuner. Comm. – Remuneration Committee – (present) 6 of 6 2 of 2 2 of 2 Director’s fees, 1,200,000 460,000 460,000 460,000 SEK Committee fees, 75,000 50,000 – 50,000 – SEK Combined fees 1,325,000 460,000 510,000 460,000 Independence Yes Yes Yes Yes from the company and the company management Independence Yes Yes Yes Yes from major shareholders

Name Roland Antonsson Marie Holmberg Kenneth Ståhl Employee Representative Employee Representative Employee Representative Positions held Member of the Board since Member of the Board since Member of the Board since 2012. Deputy Member of the 2008. Deputy Member of the 2014. Board: 2009 – 2012. Board: 2005 – 2008. Process operator. Representat­ Representative of IF Metall Representative of the Swedish ive of IF Metall. Chairman of the (the Swedish Metalworkers’ Association of Graduate IF Metall Bergsöe branch. Union). Chairman of the ­Engin­eers. IF Metall Rönnskär branch. Elected 2009 2008 2014 Born 1957 1963 1973 Shareholding1) 0 242 0 Meet. attended 6 of 7 7 of 7 4 of 5

104 BOLIDEN ANNUAL REPORT 2014 Board of Directors

Name Lennart Evrell Michael G:son Löw Ulla Litzén Leif Rönnbäck Member of the Board Member of the Board Member of the Board Member of the Board Position President and CEO of Boliden – – –

Education M.Sc. Engineering, Economics M.Sc. Economics M.Sc. Economics, MBA B.Sc. Natural Sciences, Geology Elected 2008 2010 2005 2005 Born 1954 1951 1956 1945 Directorships Chairman of the Boards of Member of the Boards of Con- Member of the Boards of Alfa – SveMin and Umeå University. cordia Maritime, Stena Bulk, Laval, Atlas Copco, Husqvarna, Member of the Board of the Preem, Norstel and the Confed- NCC and SKF. Confederation of Swedish eration of Swedish Enterprise. ­Enterprise. Deputy Chairman of the Boards of IKEM, the Swedish Chamber of Commerce for Russia & CIS, and the Swedish Association for Energy Economics. Member of the Chalmers Advisory Commit- tee and the Royal Swedish Acad- emy of Engineering Sciences. Previous President and CEO of Sapa A variety of senior positions President of W Capital Manage- HR Director, Production Director, ­positions and Munters, and a variety within Conoco Inc (1976– ment, wholly owned by the and Business Development of senior positions within 2002) in Stockholm, Houston, ­Wallen­berg Foundations. Manag- Director within LKAB. ASEA, Atlas Copco and Copenhagen, Bangkok, Prague ing Director and member of the Sphinx Gustavsberg. and London. President and Management Group of Investor CEO of Preem (2003–2012). AB. Responsible for Core Holdings and CEO of Investor Scandinavia. Shareholding1) 40,235 100 8,400 1,000 Meetings 7 of 7 7 of 7 7 of 7 7 of 7 attended Committee work – – Audit Committee Audit Committee (present) 6 of 6 6 of 6 Director’s fees, – 460,000 460,000 460,000 SEK Committee fees, – – 150,000 75,000 SEK Combined fees – 460,000 610,000 535,000 Independence No Yes Yes Yes from the company and the company management Independence Yes Yes Yes Yes from major shareholders

Name Peter Baltzari Ulf Hartman Ola Holmström Employee Representative Employee Representative Employee Representative Positions held Deputy Member of the Board Deputy Member of the Board Deputy Member of the Board since 2014. since 2014. since 2012. Representative of Boliden’s Representative of the Unionen Representative of IF Metall. Group Council and the Profit salaried employees’ trade union. Chairman of the IF Metall Kris- Sharing Foundation. Chairman of the Unionen Aitik, tineberg branch. Deputy Chair- the Boliden Area, and Stockholm man of Boliden’s Group Council branch. and the Boliden Works Council. Elected 2014 2014 2012 Born 1953 1954 1965 1) Own holdings and those Shareholding1) 1,924 0 170 of related legal or natural ­persons, on 31st December Meet. attended 4 of 5 4 of 5 7 of 7 2014.

BOLIDEN ANNUAL REPORT 2014 105 The President and Group management

The President and Group management Board accordingly tasked the Group management with reviewing the The President has ultimate responsibility for Boliden’s strategic orientation ongoing health & safety work and to take measures to turn the trend and for ensuring the compliance with and implementation of the Board of around and, in the long-term, enable Boliden’s vision of accident-free Directors’ decisions, and for ensuring that risk management, steering, sys- operations to be achieved. Having analysed the situation and the root tems, organisation and processes are all of a satisfactory standard. The Pres­ causes of the break in the trend, along with appropriate remedial measures, ident is supported in his work by the Group’s management group which, in work continued in 2014 on a number of new initiatives. A Health & addition to the President, comprises the SVPs for Boliden’s two Business Safety Officer with special coordination responsibility has been appointed Areas, Mines and Smelters, the CFO, and the SVP Corporate Responsibility at Group level and has drawn up concrete, well-defined and timetabled (CR). The Group management meets regularly once a month to follow up health & safety goals, along with the measures needed to achieve these on operations and to discuss Group-wide issues, and to draw up proposals goals. One of the tools is the “B-Safe” project, which was launched in 2013 for strategic plans, business plans, and budgets that the President submits to and which includes one-on-one discussions and follow-up discussions the Board of Directors for their consideration. The areas addressed by the with all employees in order to raise awareness of the importance of health Board have largely reflected the work of the Group management during the & safety and to strengthen the company’s safety culture. Work on rolling year. The Group management also holds two meetings every year, lasting at out B-Safe throughout the Group continued in 2014. The aim of the pro- least two full days, in order to focus on strategy. The Group management, ject is to bring about an attitude change when it comes to safety-minded- together with the management of the respective Business Areas, also meet six ness in the course of day-to-day work. Deviations from health & safety regu­ times a year to review Business Area-specific issues including a review of lations in order to achieve a short-term gain in terms of time, production budgets and operations. For large scale projects, relevant parts of the Group or other assumed benefits or advantages are never acceptable. Accidents, management form special steering groups, together with project managers such as the breakdown of the leaching tank at Kokkola are analysed and and other stakeholders, and meet regularly. The Group management also followed up in order to avoid any repetition. Investments in further meets with the company’s employee representative Board Members and their strengthening the focus on health & safety are also targeting Boliden’s sup- deputies ahead of every Board Meeting, at which time the Board Meeting pliers, contractors and others who carry out work within the framework of agenda is discussed. The company’s senior managers and specialists meet at Boliden’s operations. Stringent demands are made on these business part- management meetings every year for discussions intended to build con­ ners when it comes to respect for and compliance with applicable health & sensus and achieve widespread support on important issues. See page 107 safety regulations and instructions. Business partners are reviewed, selected for a presentation of the Group management team. and evaluated in line with these factors. Efficient and suitable licensing processes and reasonable operating con- Business management ditions are, in the light of the nature of Boliden’s operations, important Management by the Board goes through a chain of command from the issues for the company. Boliden works actively at different levels with President and the Group management to the operating units. Boliden has industry organisations to monitor and promote the interests of the mining an organisation in which responsibilities and authority are delegated industry. Boliden’s GRI-index, and the associated information in the within clear frameworks. These frameworks are defined by an annual Annual Report and separate GRI Report have, since 2013, been subject to budget which is broken down by unit, a strategic plan, and Boliden’s an external review which is designed to underline the importance of the steering documents. The steering documents, which are available on the sustainability work to Boliden and to further reinforce the confidence of intranet and which comprise the internal framework required for effective the market and other stakeholders in the work conducted by the company management, include the Financial Policy, the Code of Conduct, the in this respect. Anti-Corruption Policy, the Communications Policy, the Environmental Matters of business ethics and anti-corruption are constantly topical and Policy, and the Health & Safety Policy. an area with which the company actively works. Boliden has continued to focus on anti-corruption issues during the year and is planning new training Sustainability governance in Boliden activities in the coming years. Issues in relation to trade sanctions have also Sustainability issues are an integral part of Boliden’s operations and the been analysed during the year. Boliden has previously established a whistle work is conducted from the starting point of the most operationally crit­ blower function that can be used to report suspected cases of impropriety. ical issues. Sustainability issues are discussed at every management group and Board meeting, as is the case at the local management group meet- Auditors ings. The Board also dedicates one meeting every year to current Corpor­ The external auditor conducts independent audits of Boliden’s accounts ate Responsibility (CR) issues. One member of the Group management and Corporate Governance Report in order to ensure that they provide a works exclusively, furthermore, with CR issues. The day-to-day respons­ correct, fair and comprehensive picture of the company’s position and ibility is decentralised to the respective units. Central sustainability, envir­ results. The auditor also reviews the management by the Board of Directors onmental, energy and HR functions follow up on the units’ work and are and the President and presents his/her observations to the Board in the responsible for creating a structure and orientation for the work. Net- absence of the management. The auditor has been in contact with the works have been established within the respective functions in order to group management in 2014 in conjunction with audits or issues arising, promote knowledge exchange and development. and with the Board in conjunction with the submission of feedback The sustainability issues identified by Boliden as being of the greatest sig- reports and assistance with the work of the Audit Committee. The auditor nificance and most highly prioritised are closely linked to Boliden’s opera- also reports to the shareholders at the Annual General Meeting. tions, strategy and vision. Factors that form the basis for the prioritisation The accounting firm of Ernst & Young AB was elected at the 2014 Annual include Boliden’s own operations and their impact on people and the envir­ General Meeting to serve as the company’s auditors until the conclusion of onment, the way in which work on these issues can support the operations, the 2015 Annual General Meeting. Authorised Public Accountant, Helene expectations of Boliden from internal and external stakeholders, risks and Siberg Wendin, replaced Authorised Public Accountant, Lars Träff, as the opportunities, external factors, and applicable regulations. The challenges auditor in charge during the year. Helene Siberg Wendin is the Chairman of that will be prioritised change over time and are, therefore, regularly reviewed the Board of Ernst & Young AB and the Nordic Director for EY Assurance’s – usually once every year. It is the responsibility of the various controlling operations. Her audit engagements, in addition to Boliden, include Scania, parties within the Group to set local goals with regard to the overall issues. In IKEA, Mycronic, Ovako and Husqvarna. The Audit Committee also 2013, Boliden set new goals in the sustainability sphere that will apply until decided, during the year, that Helene Siberg Wendin and Håkan Ulrichs, a 2018, inclusive, with regard to emissions and discharges to air and water, and partner at EY Climate Change Sustainability Services, would review and sign carbon dioxide emissions – see pages 57– 60 of the Annual Report. RevR 6 “Certification of the Sustainability Report”. Remuneration to the Boliden’s long-term work with the accident frequency trend has yielded company’s auditors is payable in accordance with the approved invoices noteworthy results for a number of years, showing a steadily declining acci- received for the period up to the end of the 2015 Annual General Meeting. dent frequency. This positive trend was, however, broken in 2013 and the See Note 4 on page 80 for information on remuneration disbursed in 2014.

106 BOLIDEN ANNUAL REPORT 2014 The President and Group management Group management

Name Lennart Evrell Kerstin Konradsson Jan Moström

Position President and CEO of Boliden Senior Vice President Senior Vice President – Business Area Smelters – Business Area Mines Education M.Sc. Engineering, Economics M.Sc. Engineering B.Sc. Engineering Employed 2007 2012 1979–1998, 2000 Born 1954 1967 1959 Directorships Chairman of the Boards of SveMin Member of the Board Member of the Board of SveMin. and Umeå University. Member of of Swerea Mefos. Member of the SGU (Geological the Board of the Confederation of ­Survey of Sweden) Advisory Council Swedish Enterprise. and Mining Industry Council. Previous positions President and CEO of Sapa and Business Area President and CEO A variety of senior positions within Munters, and a variety of senior within the Åkers Group and a variety Boliden. Administrative Director of ­positions within ASEA, Atlas Copco of senior positions within SSAB. Skellefteå Municipality. and Sphinx Gustavsberg. Shareholding1) 40,235 1,300 19,500

Name Mikael Staffas Henrik Östberg

Position CFO Senior Vice President – Corporate Responsibility Education M.Sc. Engineering, MBA M.A. in languages and pedagogics Employed 2011 2008 Born 1965 1960 Directorships Member of the Board of SJ. – Previous positions CFO of Södra Skogsägarna, HR & Sustainability Director, Sapa Partner at McKinsey & Co. Group, Management Consultant at McKinsey & Co and Booz Allen ­Hamilton. Shareholding1) 6,300 3,990

1) Own holdings and those of related legal or natural persons, on 31st December 2014.

BOLIDEN ANNUAL REPORT 2014 107 Internal control

Control activities Boliden’s internal control organisation Various types of control activities are carried out within the Group and within every different aspect of the accounting and reporting process on an ongoing basis. The control activities are carried out in order to manage Risk assessment known risks and to detect and rectify any errors and discrepancies in the financial reporting. Documentation of significant control activities within the accounting Information and reporting process continued in BICS in 2014. For every risk identi- Action and Control activity communication fied, the controls that manage the risk – either preventatively or for pur- poses of detection, or both – are documented.

Information and communication Follow-up Information on policies, guidelines and manuals is available on Boliden’s intranet. Information on updates and changes to reporting and account- ing principles is issued via email and at the regular treasury and controller Internal control report by the Board of Directors meetings. External information is provided and communication con- The purpose of internal control with regard to financing reporting is to ducted in accordance with the Group’s Communications Policy. All infor- provide reasonable assurance with regard to the reliability of the external mation must be communicated in a discerning, open and transparent financial reporting and to ensure that the reports are produced in accord- manner. Group-wide steering documents are updated and communicated ance with generally accepted accounting principles, applicable legislation on a continuous basis. and statutes, and with other requirements imposed on listed companies. The Board of Directors has overall responsibility for ensuring that an effi- Follow-ups cient internal control system exists within the Boliden Group. The President Work on follow-ups of, improvements to and development of systems, is responsible for the existence of a process and organisation that ensure inter- processes and controls within the Group is ongoing. Annual testing of nal control and the quality of the internal and external financial reporting. documented controls within the framework of BICS has been conducted since 2009, both by internal resources and external auditors. Areas where Internal control function scope for improvement is identified in conjunction with audits are docu- Boliden has an internal control function responsible for implementing mented, analysed and actioned. processes and frameworks that secure internal control and ensure the quality of the financial reporting. The internal control function reports to Auditor’s Report on the Corporate Governance the CFO and presents reports on issues relating to internal control at the Statement Audit Committee’s meetings. To the Annual General Meeting of the shareholders of Boliden AB (publ), corporate identity no: 556051-4142 Control environment The Board of Directors is responsible for the Corporate Governance The control environment within Boliden is characterised by the fact that Report for 2014 on pages 100–108 and for ensuring that it has been pre- the Group has relatively few but large operating units that have carried pared in accordance with the provisions of the Swedish Annual Accounts Act. out their operations for many years, using well-established processes and We have read the Corporate Governance Report and, based on that control activities. A structure of steering documents in the form of bind- reading and our knowledge of the company and the Group, believe that ing policies and guidelines for the organisation’s delegated responsibilities we have sufficient basis for our conclusions. This means that our statutory has been established to ensure a collective attitude and methodology examination of the Corporate Governance Report has a different focus within the Group. and is substantially less in scope than that of an audit conducted in The starting point is the New Boliden Way together with associated accordance with International Standards on Auditing and generally steering documents which include the Code of Conduct, decision-­ accepted auditing standards in Sweden. making and authorisation instructions, and a financial manual covering In our opinion, the Corporate Governance Report has been prepared financial policy, accounting and reporting instructions. Local manage- and its statutory content is consistent with the annual accounts and the ment systems with more detailed instructions and descriptions of impor- consolidated accounts. tant processes have also been set up. Work on mapping financial transaction flows, identifying risks, and Stockholm, 19th February 2015 documenting control activities in a uniform and standardised way within a Group-wide internal control framework known as the Boliden Internal Ernst & Young AB Control System (BICS) continued in 2014.

Risk analysis Helene Siberg Wendin The operating units conduct ongoing risk analyses with regard to financial Authorised Public Accountant reporting. The risks inherent in the various accounting and reporting pro- cesses shall be identified, analysed and documented in BICS.

Control activity Responsible Follow-up Compliance with Boliden’s accounting manual Group accounting/Controller department Group management Control of consolidated results Group accounting/Controller department Group management Analysis and follow-up work Business Areas/Controller department Group management Budget and forecasts Business Areas/Controller department Group management Correct financial reporting controls Operating units Group accounting/internal control Tax control Operating units Group Tax Director

108 BOLIDEN ANNUAL REPORT 2014 Mineral reserves and mineral resources Mineral reserves and resources

Mineral reserves and mineral resources are the basis on which a mining company’s operations are built and require successful KtonnesAitik exploration results. Mineral resources and reserves are affected 2,500,000 Mineral reserves not only by exploration, but also by important factors such as increased dra- mining costs and metal prices. Exploration work is carried out 2,000,000 matically as a both in the vicinity of existing mines and in new areas. result of the deci- Boliden’s investments in exploration over the last 10 years 1,500,000 sion in May 2014 have resulted in substantial increases in both mineral to increase pro- resources and reserves, particularly at Garpenberg and Aitik, 1,000,000 duction. which were followed by substantial investments in boosting 500,000 production and extending production plans. 0 Mineral resources and reserves 2014 05 06 07 08 09 10 11 12 13 14 Boliden, in common with other mining companies, pro- duces an annual summary of their mineral resources and TheKtonnes Boliden Area mineral reserves. Boliden’s calculations and compilations 20,000 Mineral resources are carried out in accordance with the recommendations increased but re- of the Swedish industry organisation for mining and metal 15,000 serves decreased companies, Swedish Association of Mines, Minerals and by a correspond- ing amount. Metal Producers, SveMin. 10,000 Aitik The mineral resources and mineral reserves figures were, as usual, published in early 2014, but in May, Boliden 5,000 presented its expansion plans for Aitik that will see produc- tion there increase to 45 Mtonnes/year by 2017. New reser- 0 ves and resources were also presented at this time. The chan- 05 06 07 08 09 10 11 12 13 14 ges in Aitik’s reserves and resources since May are very small, corresponding to a small increase in the reserves (of 4 per GarpenbergKtonnes cent) and a corresponding decrease in the resources. 60,000 Exploration work resulted in a 50,000 The Boliden Area Mineral resources in the Boliden ­substantial Area have increased slightly (800 Ktonnes) and the reserves 40,000 boost in mineral have fallen to more or less the same degree (870 Ktonnes). resources. 1.5 Mtonnes of ore were mined in the Area in 2014. The 30,000 Kankberg mine and Maurliden, which reported successful 20,000 exploration and mining activities during the year, reported the best results. Other mines’ exploration work has yielded 10,000 only minor additions to reserves and resources that have 0 not balanced out the quantities mined. 05 06 07 08 09 10 11 12 13 14

Garpenberg Mineral reserves at Garpenberg have KylylahtiKtonnes increased by 1.3 Mtonnes (3 per cent), but the grades have 8,000 Kylylahti was fallen. Mineral resources increased by 35 Mtonnes (92 per 7,000 acquired­ by Boliden­ cent), although the grades of these new resources are weak. 6,000 in October. No ex- ploration work was Kylylahti 5,000 Boliden acquired the Kylylahti mine in Octo- ­carried out during ber 2014. Virtually no exploration work has been conduc- 4,000 the year and hence ted in the mine’s vicinity during the year. Drilling towards 3,000 neither reserves­ the mine’s ores has yielded additions and reductions that 2,000 nor resources­ increased.­ effectively balance one another out, and the mineral resour- 1,000 ces have hence only changed to a marginal degree, while the 0 mineral reserves have declined by the amount mined during 05 06 07 08 09 10 11 12 13 14 the year (670 Ktonnes). The purchase of the Kylylahti mine from Altona Mining TaraKtonnes Ltd also included a number of deposits and project ideas previ- 30,000 The mineral re- ously reported as mineral resources by Altona. These reports serve increased 25,000 are based on a study conducted in 2009 by Vulcan Resources as a result of Ltd and which has not been updated since then. Boliden does 20,000 new areas being not believe that these deposits represent any significant value scheduled for 15,000 mining opera- for the company or that the projects are sufficiently advanced tions. that they can, at present, be reported as mineral resources. 10,000 Tara Tara’s mineral reserve increased by 2.2 Mtonnes 5,000 (16 per cent) due to the upgrading of mineral resources. 0 The grades of the additional quantities are, however, slightly 05 06 07 08 09 10 11 12 13 14 lower, resulting in a lowering of the overall grade of the mineral reserve. The mineral resources have decreased by Proven/Probable mineral reserve Production x 10 2.3 Mtonnes, primarily due to tonnage upgraded from Measured/Indicated mineral resource resources to reserves. New deposits identified through exploration have managed to successfully replace virtually Inferred mineral resource the entire amount (2.3 Mtonnes) mined during the year. All values are shown in Ktonnes.

BOLIDEN ANNUAL REPORT 2014 109 Mineral reserves and mineral resources

About the classification Planning prices Long-term prices, 2014 Change since 2013 Mineral resources and mineral reserves are calculated separately and bro- Copper 6,600 USD/tonne – ken down into different categories. Boliden’s mineral reserves are not Zinc 2,300 USD/tonne – subsidiary amounts of the mineral resources, and when a mineral resource is upgraded to a mineral reserve, the quantity is eliminated from Lead 2,300 USD/tonne – the mineral resource. Gold 1,200 USD/tr.oz. – A mineral resource is a concentration of minerals in the bedrock that is Silver 20 USD/tr.oz. – present in a form, quality and quantity that means there is a reasonable Molybdenum 15 USD/lb. – possibility of it becoming commercially extractable. Mineral reserves are Nickel1) 18,000 USD/tonne calculated on those parts of a measured or indicated mineral resource that Cobalt1) 16 USD/lb. can be mined and processed in accordance with the company’s profitabil- Tellurium 150 USD/kg – ity requirements, taking into account factors such as waste rock dilution, USD/SEK 6.50 – 0.20 ore losses, pillar offset and process recovery. EUR/SEK 8.45 – 0.06

Inferred mineral resource 1) Added following the acquisition of Kylylahti. An inferred mineral resource is a mineral resource for which tonnage, shape, grades and mineral content can be estimated with only a low Density degree of certainty. It is indicated by geology, sampling and anticipated A formula based on head grades is utilised for large polymetallic ores, but unverified geological continuity and/or grade. It is based on informa- which make up the majority of Boliden’s mineral resources and mineral tion obtained through exploration, sampling and testing carried out in reserves. The formula is verified using density measurements. In other accordance with appropriate techniques. The information is limited or cases, measurements are carried out for the different ores or rock types of uncertain quality and reliability. that affect the density.

Indicated mineral resource Waste rock dilution An indicated mineral resource is a mineral resource for which tonnage, Mining usually incurs some waste rock dilution that varies, depending shape, grades and mineral content can be estimated with reasonable cer- on the mining method used, the ore’s geometry, and other geological tainty. It is indicated by geology, sampling and anticipated but unverified ­factors. Boliden systematically monitors the waste rock dilution of the geological continuity and/or grade. It is based on information obtained ore extracted and the experience gained thereby enables waste rock dilu- through exploration, sampling and testing carried out in accordance tion to be included in all mineral reserve calculations. with appropriate techniques. The information points are, however, too sparse or inappropriately distributed to ensure the deposit’s geological Ore losses and/or grade continuity. Some ore may have to be left unextracted (e.g. in the form of pillar off- set), depending on the mining method used, the ore’s geometry and Measured mineral resource other technical factors. The mineral reserve calculations take these factors A measured mineral resource is a mineral resource for which tonnage, into account, based on assumptions regarding mining method and the shape, grades and mineral content can be estimated with a high degree of information available when the calculations were made. certainty. It is based on information gained through detailed and reliable exploration, sampling and testing carried out in accordance with appro- Minimum ore width priate techniques. The information points are sufficiently dense to dem- The minimum horizontal ore width is based on assumptions regarding onstrate the deposit’s geological and/or grade continuity. mining method and equipment. Ore zones that are narrower than the minimum ore width are recalculated using the average for the full width. Probable mineral reserve A probable mineral reserve is calculated from those parts of an indicated Regulations, codes and recommendations or, under certain circumstances, measured mineral resource where min- Boliden’s mineral reserves and mineral resources have been calculated and ing-engineering and profitability studies show that it is technically and compiled in accordance with recommendations by the Swedish industry economically feasible to mine and process the deposit in line with the organisation for mining and metal companies, SveMin, known as the FRB company’s profitability requirements. standard. This is an independent set of regulations but based on “The Inter- national Template for the public reporting of exploration results, mineral Proven mineral reserve resources and mineral reserves, July 2006”, produced by the Committee for A proven mineral reserve is calculated from those parts of a measured Mineral Reserves International Reporting Standards (CRIRSCO) in a bid mineral resource where mining-engineering and profitability studies to achieve a harmonised international practice. The FRB standard is, there- show that it is technically and economically feasible to mine and process fore, consistent with international regulations such as the Australasian Insti- the deposit in line with the company’s profitability requirements. tute of Mining and Metallurgy’s JORC code and the “CIM Standards on Mineral Resources and Mineral Reserves, Definitions and Guidelines”, Basis for the calculations which constitute that part of the Ontario Securities Commission (OSC) Boliden holds the required environmental permits and exploitation con- rules and regulations, National Instrument 43–101, that regulate how cessions for all of the mines currently in operation. The mineral resources ­mineral reserves and mineral resources should be reported. are protected by exploitation concessions or exploration permits. The mineral resources and mineral reserves that have been compiled The calculations are based on the following underlying factors: and presented in this report have been reviewed and approved by ­Gunnar Agmalm, Boliden’s Mineral Reserves and Project Evaluation Metal prices Manager, who is registered as a “Qualified Person” by SveMin and as Mineral resources and mineral reserves are the basis for the company’s a “Competent Person” in accordance with JORC. long-term planning and will be mined for many years to come. Planning prices, which are an expression of the anticipated average prices for February 2015 ­metals and currencies over the forthcoming business cycle are, therefore, primarily utilised in the calculations. Boliden’s current planning prices Gunnar Agmalm are shown in the following table: Qualified Person SveMin

110 BOLIDEN ANNUAL REPORT 2014 MINERAL RESERVES, 31st December 2014

MINERAL RESERVES, 31st December 2014 Quantity, Ktonnes 2014 Au Ag Cu Zn Pb Mo Te 2014 2013 (g/t) (g/t) (%) (%) (%) (g/t) (g/t) The Boliden Area Polymetallic mineralisations­ Kristineberg Proven 340 840 1.2 24 1.2 1.9 0.1 Probable 5,500 6,800 0.6 42 0.3 6.9 0.4

Renström Proven 190 150 2.7 149 0.8 6.8 1.4 Probable 3,670 3,360 1.9 96 0.7 4.8 0.9

Maurliden Proven 1,700 1,400 1.3 47 0.4 3.4 0.3 Probable

Maurliden Östra Proven Probable 190 200 0.3 7 1.0 0.0 Total Proven 2,200 2,360 1.4 52 0.5 3.4 0.4 Polymetallic mineralisations­ Probable 9,380 10,320 1.1 63 0.5 5.9 0.6

Gold mineralisations Kankberg Proven 1,430 880 2.9 10 211 Probable 2,070 2,390 3.9 11 192

Aitik1) Proven 756,000 762,000 0.15 1.5 0.22 24 Probable 370,000 323,000 0.12 1.2 0.21 28

Garpenberg Proven 13,900 14,900 0.3 110 0.06 5.3 2.1 Probable 23,700 21,400 0.4 126 0.05 3.7 1.6

Kylylahti 2) Proven 400 0.6 1.59 0.7 Probable 3,500 1.0 1.58 0.6

Tara Proven 3,000 3,400 7.1 1.6 Probable 12,300 9,700 6.5 1.5

Figures may be rounded up or down.

1) Aitik’s figures for 2013 have been updated in line with the press release dated 6th May 2014. 2) The acquisition of Kylylahti was completed in October 2014.

BOLIDEN ANNUAL REPORT 2014 111 MINERAL RESOURCES, 31st December 2014

MINERAL RESOURCES (excl. mineral reserves), 31st December 2014 Quantity, Ktonnes 2014 Au Ag Cu Zn Pb Mo Te Ni Co 2014 2013 (g/t) (g/t) (%) (%) (%) (g/t) (g/t) (%) (%) The Boliden Area Polymetallic ­mineralisations Kristineberg Measured 50 50 0.7 45 1.3 4.2 0.2 Indicated 1,930 480 0.7 25 0.8 4.2 0.2 Inferred 3,680 4,440 0.6 36 0.5 3.1 0.2 Petiknäs N Measured 310 310 8.1 73 1.8 3.1 0.3 Indicated 1,200 1,200 2.7 52 0.6 1.8 0.3 Inferred 720 720 3.3 33 0.5 1.2 0.2 Renström Measured Indicated 800 1,220 1.8 168 0.5 7.0 1.6 Inferred 2,630 2,950 3.5 140 0.2 8.3 1.5 Maurliden Measured 670 1,050 1.0 30 0.5 2.2 0.2 Indicated 260 360 0.7 18 0.3 1.6 0.1 Inferred Maurliden Östra Measured Indicated 360 360 0.4 11 0.4 0.2 Inferred Total Measured 1,000 1,410 3.1 44 0.9 2.6 0.2 Polymetallic ­mineralisations Indicated 4,500 3,600 1.4 56 0.6 3.6 0.4 Inferred 7,000 8,100 1.9 75 0.4 4.8 0.7

Gold mineralisations Kankberg Measured 220 110 3.4 9 155 Indicated 550 150 2.9 7 155 Inferred 3,050 1,890 4.3 8 187 Älgträsk Measured Indicated 1,020 1,080 2.8 4 Inferred 2,230 2,500 2.1 3 Total Measured 220 110 3.4 9 Gold mineralisations Indicated 1,600 1,200 2.8 5 Inferred 5,300 4,400 3.3 6

Aitik1) Measured 222,000 249,000 0.10 1.1 0.16 18 Indicated 1,421,000 1,467,000 0.10 0.9 0.16 24 Inferred 226,000 226,000 0.11 0.5 0.14 22

Garpenberg Measured 10,500 2,800 0.3 111 0.06 3.4 1.6 Indicated 43,400 15,800 0.3 102 0.05 2.4 1.1 Inferred 19,400 19,500 0.4 88 0.07 3.4 1.7

Kylylahti 2) Measured 1,200 0.3 0.77 0.4 0.2 0.2 Indicated 2,800 0.6 0.53 0.3 0.3 0.2 Inferred 500 1.3 1.48 0.4 0.2 0.3

Tara Measured 800 600 6.2 2.2 Indicated 5,500 7,300 6.2 2.2 Inferred 6,300 5,400 6.2 1.9

Laver Measured 1,100 1,100 0.11 4.4 0.20 18 Indicated 512,400 512,400 0.13 3.1 0.22 36 Inferred 550,600 550,600 0.10 3.1 0.21 33

Rockliden Measured Indicated 800 800 0.08 102 2.1 4.4 0.9 Inferred 9,200 9,200 0.06 48 1.8 4.0 0.4

Figures may be rounded up or down.

1) Aitik’s figures for 2013 have been updated in line with the press release dated 6th May 2014. 2) The acquisition of Kylylahti was completed in October 2014.

112 BOLIDEN ANNUAL REPORT 2014 Definitions Definitions

Average number of employees The average Equity per share Shareholders’ equity divided Return on capital employed Operating profit number of employees during the year con- by the number of outstanding shares. divided by the average capital employed. The verted to full-time positions. average capital employed for each year con- Free cash flow Cash flow from operating sists of an average of the closing capital Balance Sheet total The sum of the assets activities including cash flow from investment employed in the last 13 months. Measured side or the sum of the shareholders’ equity and activities. before tax. liabilities side of the Balance Sheet. Net debt Interest-bearing current and long- Return on shareholders’ equity Profit for the Capital employed The Balance Sheet total term liabilities (including pension liabilities) year as a percentage of average shareholders’ less interest-bearing investments, tax receiv­ less financial assets (including liquid assets). equity in the last 13 months. Measured after tax. ables and non-interest-bearing provisions and liabilities. Net debt/equity ratio Net debt divided by Total return The sum of the share’s perfor- shareholders’ equity. mance during the year plus dividend paid Cash flow per share The cash flow for the Operating profit (EBIT) Revenues less all divided by the share price at the beginning of period divided by the average number of out- the year. standing shares. costs attributable to the operations but exclud- ing net financial items and taxes. Dividend yield Dividend per share as a per- centage of the share price. Operating profit (EBIT) excluding revalua- tion of process inventory Revenues minus all Earnings per share Net result for the period costs attributable to the operations but exclud- divided by the average number of outstanding ing the effects of the revaluation of process shares. inventory, net financial items and taxes.

Equity/assets ratio Shareholders’ equity as a P/E ratio Share price divided by earnings percentage of the Balance Sheet total. per share.

Definition of Cash cost Pro rata costing Definition of Cash margin Boliden uses the Wood Mackenzie’s cash cost In pro rata cash costing, the costs are divided up Boliden uses Wood Mackenzie’s cash margin metrics, C1 Normal costing and C1 Pro rata between the various metals on the basis of the compilations to measure the smelter’s cost posi- costing, to measure the mines’ cost position ­individual metal’s share of the total net revenue. tion in relation to other smelters. The cash mar- in relation to other mines worldwide. The lower gin is the difference between income and cash a mine’s cash cost, the better its cost position. Composite costing cost, expressed in USc/lb. of metal. The income Cash cost is expressed in USc/lb. of metal. In composite costing, mines are included using comprises treatment and refining charges, free either normal costing or pro rata costing on metals and income from by-products. Normal costing the basis of criteria based on the metals’ net The income for zinc smelters includes In normal costing calculations, the costs are revenue. If a metal accounts for 65 per cent income generated by sales of surplus energy, allocated in their entirety to one main metal or more of the total net revenue, the cash cost while for copper smelters, the income gener- and then reduced by the net revenue1) of other is calculated using normal costing, while if a ated by the sales of sulphuric acid and surplus metals, known as subsidiary metals. metal accounts for less than 65 per cent of the energy is added as a credit when calculating total net revenue, the cash cost is calculated + Mining operations, concentration and the cash cost. using pro rata costing. administration costs 2) The calculations for copper smelters are 1) Calculating the net revenue of mines’ metals expressed as unit of metal produced from con- + Costs of freighting concentrate The net revenue is the payable income from the metal, centrate, while for zinc smelters, it is expressed to smelters less freight costs and treatment and refining charges. as unit of finished metal produced. Income is + Treatment and refining charges (TC/RC) normally included if it is regarded as having been + Income from payable metal derived from the main process during the pro- Deductions for net revenue – duction of metal and the product is saleable. of subsidiary metals – The metal’s freight cost = Cash cost C1 Normal costing – The metal’s treatment and refining charges = The net revenue of the metal

2) Administrative costs attributable to the mine.

BOLIDEN ANNUAL REPORT 2014 113 Industry-specific concepts and definitions Industry-specific concepts and definitions

Alloy Substance with metallic properties Metal concentrate Also known as dressed Price escalators (PP) Also known as price- which is composed of two or more chemical ore or mined concentrate. Metal concentrate sharing clauses. The clauses in the agree- elements, at least one of which is a metal. is the result of the concentration processes ments for zinc smelting charges that distrib- that separate out the financially valuable min- ute changes in metal prices between mines Base metals The most common metals, erals present in ore from those with no finan- and smelters. There have been no price esca- e.g. zinc, copper, lead, nickel and aluminium. cial value. lator clauses in copper treatment and refining charges for many years now. Cash cost Common measurement used to Metal content The quantities of, for example, show the costs affecting a mine’s cash flow, zinc, copper, lead, gold and silver contained Recovery The percentage portion of the converted into US dollars (average rate for in concentrates. Zinc concentrates generally quantity of a given metal in an ore extracted the measurement period). Used to compare contain approximately 50 per cent zinc metal, during the concentration process. the mine’s cost position in relation to other while copper concentrates generally contain mines. See pages 17 and 113. approximately 30 per cent copper. The lead Secondary material Various types of recycling materials from which metals can be recovered, Complex ore Ore that contains several content of mined concentrate is usually around 65 per cent. e.g. electronic and metal scrap, metal ashes, ­metals, e.g. zinc, copper, lead, gold and silver. slag, dust and scrap lead batteries. Concentrator A plant in which ore is pro- Metal premium The price agreed in advance, over and above the LME price, and Smelter A plant in which metal raw materials, cessed mechanically and/or chemically to metal concentrates or secondary materials extract and produce a concentrate of the paid by customers for specifically adapted metal that is supplied to them. are processed to separate metals from impur­ ­valuable minerals. ities by means of high temperature reactions. Copper cathode An end product from copper Mineralisation A concentration of minerals in the bedrock. Treatment and refining charges (TC/RC) smelters in the form of 99.99 per cent pure The remuneration received by a smelter for copper plates. Mineral reserves Those parts of a mineral processing smelting material (concentrate Feed The smelter’s raw material consump- resource that can be mined and processed in and secondary materials) and extracting tion, i.e. the amount of metal concentrate or accordance with the company’s profitability ­metals. Copper smelters’ processes can be secondary material processed and refined. requirements and taking into account factors broken down into a treatment phase and a such as waste rock dilution and the percent- refining phase, while zinc smelters’ processes Field exploration Exploration in new areas. age of metal in an ore that can be extracted only involve a treatment phase, and hence Associated with higher costs than with mine- in the concentration process. Mineral zinc smelters’ remuneration only comprises site exploration. reserves are divided into two categories: a treatment charge (TC). probable mineral­ reserves and proven Free metals The percentage of metal con- ­mineral reserves. Underground mine Mine where the ore is centrates bought in that an individual smelter mined using underground tunnels. The mining can process over and above the payable Mineral resource A concentration of miner- methods used in Boliden’s underground metal content. This percentage generates als in the bedrock that may become commer- mines include the cut-and-fill method and income without incurring a raw material cost. cially extractable. Mineral resources are ­sub-level stoping. divided into three categories: inferred mineral Galvanising An electrochemical process resources, indicated mineral resources, and Waste rock Economic term for rock which, whereby a metal is coated with a thin layer of measured mineral resources. unlike ore, contains no valuable material. another metal, such as zinc. Galvanising is commonly used to protect against corrosion Mine-site exploration Exploration in the Zinc ingot An end product from zinc smelters (rust). ­vicinity of existing mines. New deposits locat- with detailed specifications with regard to ed close to existing mines mean a shorter degree of purity, weight and size. Gold doré An impure gold/silver alloy cast time from discovery to production because as a bullion in the refinery. Further processed the infrastructure is already in place. to pure gold and silver at a smelter. Open pit A method of mining mineral de­ Abbreviations ISO International Organization for Standardiza- posits located near the surface. The waste tion. Standards include environmental manage- Lb = pound = 0.4536 kg rock is stripped and the ore mined directly ment (ISO 14001) and quality (ISO 9001), etc. at the surface. Troy ounce = 31.1035 gram Jarosite A mineral primarily comprising iron Ore Economic term for minerals, rock types sulphate that is a common waste product of USD = US dollars or other bedrock components that can be zinc production. profitably mined to extract metals or other USc = US cents valuable substances. Kaldo furnace Rotating and tippable furnace SEK = Swedish kronor for the smelting and process treatment of Ore grade The average quantity of valuable copper, lead and precious metals, etc., includ- NOK = Norwegian kronor metals in a tonne of ore, expressed as grams ing the recycling of metals from electronic per tonne for precious metals and as a per- EUR = euro scrap. The plastic present in the scrap is centage for other metals. used to smelt the metals, thereby reducing Ag = silver the process’ energy requirement. Payable metal content The percentage of the metal content of the concentrate for Au = gold LBMA London Bullion Market Association. which the smelters pay when purchasing con- International market responsible for the daily Cu = copper centrate. pricing of precious metals. Pb = lead Precious metals Metals that are less com- LME London Metal Exchange. International monly present in the earth’s crust than base Zn = zinc market where non-ferrous metals are bought metals and which are regarded, to a greater and sold. Trading on the LME is used as the extent, as a type of investment asset by finan- basis for the daily pricing of metals worldwide. cial sector players. The most common precious The LME also maintains warehouse stocks of metals are gold, silver, platinum and palladium. the metals traded.

114 BOLIDEN ANNUAL REPORT 2014 Ten-year overviews Ten-year overview – the Group

2005 2006 2007 2008 2009 2010 2011 20121) 2013 2014

Result, SEK m Revenues 20,441 35,213 33,204 30,987 27,635 36,716 40,323 40,001 34,409 36,891 Operating profit before depreciation 4,303 9,831 6,805 2,426 5,186 7,445 6,674 6,731 4,632 6,035 Operating profit excluding ­revaluation of process inventory 2,631 7,891 5,620 1,793 2,350 4,830 5,008 4,042 2,271 2,605 Operating profit 3,069 8,522 5,428 1,004 3,623 5,643 4,748 4,171 1,803 2,759 Profit after financial items 2,812 8,313 5,196 723 3,377 5,331 4,560 3,992 1,581 2,471 Taxes –766 –2,045 –1,409 212 –876 –1,375 –1,171 –651 –288 –572 Net profit for the year 2,046 6,268 3,787 935 2,501 3,957 3,389 3,341 1,294 1,899

Cash flow, SEK m Cash flow from operating activities 2,540 8,010 3,730 5,470 3,974 6,197 4,021 5,518 3,505 5,789 Cash flow from investment activities –982 –1,739 –2,518 –4,633 –4,922 –2,995 –4,024 –4,129 –4,971 –4,206 Free cash flow 1,558 6,271 1,212 837 –948 3,202 –3 1,389 –1,466 1,583 Cash flow from financing activities –912 –4,593 –3,532 –514 571 –3,199 –464 –730 1,060 –1,355 Cash flow for the year 646 1,678 –2,320 323 –377 3 –467 659 –406 228

Capital structure and return, SEK m Balance Sheet total 22,918 26,929 27,231 30,252 33,258 35,128 37,615 40,080 41,841 43,865 Capital employed 15,822 17,667 20,145 24,733 26,229 27,151 30,473 31,236 34,451 35,087 Return on capital employed, % 20 52 29 5 14 21 17 14 5 8 Shareholders’ equity 10,289 16,089 12,932 16,131 16,257 18,846 20,032 22,354 23,075 23,974 Return on shareholders’ equity, % 22 51 26 7 16 23 17 16 6 8 Equity/assets ratio, % 45 60 47 53 49 54 56 56 55 55 Net debt 5,526 –195 5,524 6,305 7,402 4,584 6,063 6,276 8,673 8,283 Net debt/equity ratio, % 54 –1 43 39 46 24 29 28 38 35

Data per share, SEK Earnings for the period Basic 7.07 21.66 13.37 3.42 9.14 14.47 12.39 12.21 4.72 6.94 Diluted 7.06 21.66 13.37 3.42 9.14 14.47 12.39 12.21 4.72 6.94 Cash flow from operating activities Basic 8.77 27.67 13.17 20.00 14.53 22.66 14.70 20.17 12.82 21.17 Diluted 8.76 27.67 13.17 20.00 14.53 22.66 14.70 20.17 12.82 21.17 Shareholders’ equity Basic 35.55 55.58 47.28 58.98 59.44 68.90 76.90 81.68 84.31 87.63 Diluted 35.50 55.59 47.28 58.98 59.44 68.90 76.90 81.68 84.31 87.63 Proposed dividend 2.00 4.00 4.00 1.00 3.00 5.00 4.00 4.00 1.75 2.25 Share price, 31/12 59.98 162.41 81.25 17.80 92.1 136.7 100.5 122.1 98.45 125.5 Highest price paid 59.98 163.80 165.00 86.00 95.3 137.7 143.5 125.6 126.7 129.9 Lowest price paid 24.64 57.91 79.00 14.60 16.1 79.5 65.35 87.8 80.2 90.7 P/E ratio 8.48 7.50 6.07 5.20 10.07 9.45 8.11 10.0 20.9 18.09 Change in share price during the year, % 129 171 –50 –78 417 48 –26 21 –19 27 Dividend yield, % 3.3 2.5 4.9 5.6 3.3 3.7 4.0 3.3 1.8 1.8 Total yield, % 129 174 –48 –73 423 52 –23 25 –16 30

Number of shares, million Number of shares, 31/12 289 289 274 274 274 274 274 274 274 274 Average number of shares 289 289 283 274 274 274 274 274 274 274 No. own shares held, 31/12 – – 16 – – – – – – –

SUSTAINABILITY-RELATED KEY RATIOS Employees Number of Group employees, total 2) 4,530 4,519 4,524 4,608 4,379 4,412 4,597 4,795 4,815 4,881 Number of female employees 2) 563 587 604 650 598 669 736 813 824 852 Percentage of women on the Board/in Group management, % 25/12.5 25/20 25/33 25/29 27/17 27/0 27/0 27/17 27/20 27/20 Accidents per one million hours worked, own personnel, frequency 11.9 11.2 9.9 9.1 5.5 8.2 4.9 6.6 7.0 5.8 Accidents per one million hours worked incl. contractors, frequency 9.1 8.9 7.9 Sick leave rate, % 5.5 5.1 4.7 4.7 4.2 4.0 3.7 3.7 3.9 4.3 Energy consumption Total energy consumption, TJ 14,866 15,183 16,303 15,257 14,664 16,147 15,579 16,140 16,415 17,231 Water withdrawal, total, km³ 0.143 0.145 0.125 0.134 0.135 0.140 0.153 0.160 0.155 0.173

BOLIDEN ANNUAL REPORT 2014 115 Ten-year overviews

Ten-year overview the Group, cont. 2005 2006 2007 2008 2009 2010 2011 20121) 2013 2014 Emissions & Discharges Direct emissions of greenhouse gases, Ktonnes 402 384 413 450 486 510 499 574 578 554 Indirect emissions of greenhouse gases, electricity purchased, Ktonnes 384 395 384 357 356 398 408 416 402 425 Indirect emissions of greenhouse gases, heating and steam pur- chased, Ktonnes 12 13 24 0 5 6 17 18 20 22 Carbon dioxide emissions, total, Ktonnes 798 791 822 807 848 913 924 1,008 1,000 1,001 Emissions of metals to air, tonnes 35 35 35 23 21 23 23 20 19 22 Sulphur dioxide emissions to air, tonnes 3) 6,910 7,890 8,070 8,260 6,930 6,850 7,410 8,240 6,410 7,320 Discharges of metals to water, tonnes 3) 19 25 28 29 14 18 14 29 29 28 Discharges of nitrogen to water, tonnes 354 295 294 283 225 199 205 253 219 225

1) The 2012 comparison year has been restated due to 2) Refers to full-time employees from 2008 onwards. 3) The number of reporting emission and discharge points the changes to the IFRIC 20 and IAS 19 accounting The period from 2005–2007 refers to average have, as of 2012, been increased within ”discharges of principles in 2013. ­number of employees. metals to water” and ”sulphur dioxide emissions to air”. Ten-year overview – Mines

2005 2006 2007 2008 2009 2010 2011 20121) 2013 2014

Metal concentrate production Zinc, Ktonnes 342 328 333 297 307 294 283 271 272 294 Copper, Ktonnes 87 87 63 57 55 76 81 79 79 78 Lead, Ktonnes 49 49 54 53 57 50 49 49 48 61 Gold, kg 4,471 4,510 2,834 2,603 3,130 3,727 3,681 3,644 3,849 4,379 Gold, troy oz. 147,738 145,005 91,121 83,672 100,623 119,839 118,332 117,150 123,759 140,789 Silver, kg 226,114 211,640 241,701 211,683 214,120 230,756 231,388 229,791 261,804 323,325 Silver, '000 troy oz. 7,270 6,804 7,771 6,806 6,884 7,419 7,439 7,388 8,417 10,395 Tellurium, kg 2) – – – – – – – 6,791 24,457 30,917

Financial data Revenues 4,642 7,261 7,567 5,178 6,509 9,580 10,279 9,509 8,303 9,318 Operating expenses 2,881 3,314 3,578 3,716 3,652 4,535 5,189 5,008 4,924 5,417 Depreciation 507 543 605 618 673 954 1,110 1,669 1,917 2,264 Operating profit 1,117 3,010 3,135 734 2,159 4,113 3,913 2,974 1,598 1,299 Investments 934 1,065 1,503 3,886 4,435 2,189 2,338 3,570 3,763 3,450 Capital employed 4,120 4,392 4,970 8,292 12,476 13,501 14,272 16,125 18,288 19,615

AITIK1 Milled ore, Ktonnes 16,674 18,481 18,178 17,813 18,791 27,596 31,541 34,321 37,070 39,090 Head grades Cu, % 0.44 0.40 0.32 0.30 0.27 0.27 0.24 0.22 0.21 0.20 Au, g/tonne 0.22 0.25 0.14 0.14 0.13 0.16 0.14 0.11 0.10 0.09 Ag, g/tonne 3.61 2.72 3.67 2.81 1.99 2.07 2.15 2.50 2.28 2.14 Concentrate production Cu, Ktonnes 237 240 185 174 171 263 267 270 292 277 Concentrate grade Cu, % 27.67 27.55 27.25 27.20 26.94 25.58 25.00 24.85 24.29 24.48 Metal production Cu, Ktonnes 66 66 50 47 46 67 67 67 71 68 Au, kg 1,840 2,342 1,178 1,218 1,348 2,208 2,447 1,959 1,765 1,767 Au, troy oz. 59,157 75,286 37,865 39,172 43,338 70,987 78,657 62,996 56,731 56,823 Ag, kg 41,297 35,730 42,301 32,087 24,701 36,468 45,040 51,698 53,612 54,854 Ag, ’000 troy oz. 1,328 1,149 1,360 1,032 794 1,172 1,448 1,662 1,724 1,764 Financial data, SEK m Revenues 1,653 2,995 2,305 1,949 1,997 3,996 4,549 4,170 3,593 3,427 Operating profit before depreciation 900 2,207 1,388 1,049 1,134 2,442 2,583 2,651 1,902 1,669 Operating profit 793 2,073 1,217 876 949 2,008 2,046 1,732 882 558 Investments 325 420 760 2,994 3,674 1,210 1,178 1,2071) 1,143 1,181 Cash cost USc/lb Cu C1, Normal 76 85 129 124 86 105 120 83 131 138 Proven and probable mineral reserves 3) Mtonnes 219 625 610 633 747 733 710 702 1,085 1,126 Cu, % 0.31 0.28 0.29 0.27 0.25 0.25 0.25 0.25 0.22 0.22 Au, g/tonne 0.20 0.20 0.20 0.20 0.10 0.10 0.10 0.10 0.14 0.14

116 BOLIDEN ANNUAL REPORT 2014 Ten-year overviews

2005 2006 2007 2008 2009 2010 2011 20121) 2013 2014

THE BOLIDEN AREA Milled ore, Ktonnes 1,782 1,679 1,848 1,355 1,192 1,375 1,677 1,862 1,809 1,862 of which, slag 166 222 187 293 242 157 134 241 301 245 Head grades Zn, % 6.08 5.56 4.81 4.01 3.69 3.69 2.87 2.15 2.61 3.00 Cu, % 1.49 1.56 0.81 1.00 0.95 0.79 1.03 0.84 0.61 0.60 Pb, % 0.56 0.47 0.50 0.43 0.46 0.37 0.27 0.23 0.28 0.30 Te, g/tonne 2) – – – – – – – 8.94 28.78 33.8 Au, g/tonne 2.1 1.8 1.6 1.5 2.0 1.6 1.2 1.3 1.6 1.8 Ag, g/tonne 78 66 66 61 65 55 41 35 42 42.6 Concentrate production Zn, Ktonnes 162 131 131 70 58 74 69 56 63 82 Cu, Ktonnes 76 72 42 32 28 31 60 47 31 32 Pb, Ktonnes 11 7 11 5 4 4 3 3 3 5 Concentrate grade Zn, % 54.0 54.5 54.0 54.7 54.7 54.7 55.7 54.6 55.9 54.9 Cu, % 27.5 27.9 27.8 29.0 28.4 26.4 23.3 25.5 25.4 24.5 Pb, % 28.9 31.1 31.6 41.7 42.7 41.5 41.7 44.5 45.26 32.9 Metal production Zn, Ktonnes 87 72 71 38 31 40 38 30 35 45 Cu, Ktonnes 21 20 12 9 8 8 14 12 8 8 Pb, Ktonnes 3 2 3 2 2 2 1 1 1 2 Te, kg 2) – – – – – – – 6,791 24,457 30,917 Au, kg 2,428 1,900 1,412 1,141 1,568 1,285 989 1,434 1,808 2,062 Au, troy oz. 78,065 61,071 45,405 36,679 50,414 41,318 31,781 46,102 58,117 66,293 Ag, kg 87,212 67,828 79,753 47,671 48,186 52,806 45,318 41,405 45,212 47,421 Ag, ’000 troy oz. 2,804 2,181 2,564 1,533 1,549 1,698 1,457 1,331 1,454 1,525 Financial data, SEK m Revenues 1,359 2,262 1,928 1013 1,109 1,448 1,587 1,552 1,317 1,712 Operating profit before depreciation 476 1,129 976 222 405 588 659 554 250 474 Operating profit 350 981 849 115 303 481 530 369 19 188 Investments 98 107 144 237 264 298 565 623 364 261 Cash cost USc/lb Zn C1, Pro-rata 72 78 Cash cost USc/lb Cu C1, Pro-rata 264 216 Cash cost USD/tr. oz. Au C1, Pro-rata 1,098 921 Proven and probable mineral reserves Polymetallic ores, Ktonnes 2,920 4,450 7,020 7,350 6,950 8,220 8,980 9,110 12,680 11,580 Zn, % 6.7 5.0 3.6 4.3 4.3 5.3 5.2 5.4 6.0 5.5 Cu, % 0.9 1.0 0.9 0.8 0.8 0.6 0.6 0.6 0.6 0.5 Gold ores, Ktonnes 400 530 0 0 1,610 2,780 3,100 3,584 3,274 3,500 Au, g/tonne 4 3.2 0 0 4.9 4.1 3.6 3.8 3.8 3.5 Te, g/tonne 1.5 1.4 0 0 0 186 165 177 181 200

KYLYLAHTI 4) Milled ore, Ktonnes 172 Head grades Cu, % – – – – – – – – – 1.58 Zn, % – – – – – – – – – 0.50 Au, g/tonne – – – – – – – – – 0.67 Concentrate production Cu, Ktonnes – – – – – – – – – 13,275 Zn, tonnes – – – – – – – – – 756 Concentrate grade Cu, % – – – – – – – – – 19.2 Zn, % – – – – – – – – – 44.3 Metal production Cu, tonnes – – – – – – – – – 2,546 Zn, tonnes – – – – – – – – – 335 Au, kg – – – – – – – – – 82 Au, troy oz. – – – – – – – – – 2,624 Financial data, SEK m Revenues – – – – – – – – – 117 Operating profit before depreciation – – – – – – – – – 31 Operating profit – – – – – – – – – 7 Investments – – – – – – – – – 754 Cash cost USc/lb Cu C1, Normal – – – – – – – – – 190 Proven and probable miner. reserves Ktonnes – – – – – – – – – 3,900 Cu, % – – – – – – – – – 1.58 Zn, % – – – – – – – – – 0.6 Au, g/tonne – – – – – – – – – 0.9

BOLIDEN ANNUAL REPORT 2014 117 Ten-year overviews

Ten-year overview Mines, cont. 2005 2006 2007 2008 2009 2010 2011 20121) 2013 2014

GARPENBERG Milled ore, Ktonnes 1,102 1,182 1,255 1,365 1,394 1,443 1,456 1,484 1,495 2,224 Head grades Zn, % 5.8 5.7 6.3 6.9 7.3 6.6 6.2 5.6 5.2 5.1 Cu, % 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Pb, % 2.3 2.2 2.5 2.6 2.8 2.5 2.4 2.1 2.1 2.1 Au, g/tonne 0.3 0.4 0.3 0.3 0.2 0.3 0.3 0.3 0.3 0.3 Ag, g/tonne 117 123 125 130 139 133 133 129 153 136 Concentrate production Zn, Ktonnes 106 113 132 158 167 160 148 136 127 182 Cu, Ktonnes 3 3 3 3 3 3 2 2 3 3 Pb, Ktonnes 28 29 36 41 44 41 39 35 36 58 Concentrate grade Zn, % 55.0 54.2 54.1 53.1 53.8 53.7 55.0 54.8 55.4 54.6 Cu, % 21.9 23.1 22.1 20.4 18.3 18.3 19.1 17.7 18.0 14.8 Pb, % 74.2 71.5 70.1 69.0 71.3 72.0 72.4 70.7 70.3 63.1 Metal production Zn, Ktonnes 58 61 71 84 90 86 81 75 70 99 Cu, Ktonnes 0.6 0.6 0.7 0.6 0.5 0.5 0.4 0.4 0.5 0.4 Pb, Ktonnes 21 21 25 29 31 29 28 25 25 37 Au, kg 203 269 244 243 214 234 246 250 277 468 Au, troy oz. 6,517 8,648 7,851 7,821 6,870 7,534 7,895 8,051 8,911 15,049 Ag, tonnes 98 108 118 130 139 140 140 135 162 218 Ag, ’000 troy oz. 3,138 3,475 3,787 4,189 4,473 4,505 4,505 4,341 5,201 7,014 Financial data, SEK m Revenues 637 1,311 1,710 1,163 1,490 1,902 2,155 1,876 1,675 2,318 Operating profit before depreciation 257 927 1,195 598 945 1,293 1,506 1,262 1,025 1,319 Operating profit 194 850 1,095 466 793 1,124 1,314 1,033 776 919 Investments 230 273 323 344 157 281 660 1,459 2,045 916 Cash cost USc/lb Zn C1, Pro-rata 46 56 Proven and probable miner. reserves Ktonnes 10,600 17,200 20,800 26,000 25,800 25,100 23,600 25,600 36,300 37,600 Zn, % 5.7 5.7 5.2 5.1 5.4 5.3 5.1 5.1 4.6 4.3 Ag, g/tonne 121 123 116 134 142 145 144 131 132 120

TARA Milled ore, Ktonnes 2,551 2,751 2,658 2,411 2,508 2,593 2,486 2,502 2,493 2,287 Head grades Zn, % 8.4 7.7 7.7 7.8 7.9 7.0 7.0 7.0 7.1 6.9 Pb, % 1.6 1.4 1.5 1.5 1.5 1.4 1.4 1.4 1.5 1.6 Concentrate production Zn, Ktonnes 359 356 351 320 344 316 307 305 298 267 Pb, Ktonnes 45 44 42 40 41 34 34 41 39 42 Concentrate grade Zn, % 54.6 54.8 54.5 54.7 53.9 53.0 53.3 54.4 55.9 56.0 Pb, % 57.6 58.8 60.9 56.7 57.5 53.7 58.8 55.2 56.1 53.1 Metal production Zn, Ktonnes 196 195 191 175 186 167 164 166 166 150 Pb, Ktonnes 26 26 26 23 24 19 20 23 22 22 Ag, kg 1,959 1,775 1,850 1,638 2,092 1,344 909 1,673 1,197 2,433 Ag, ’000 troy oz. 63 57 59 53 67 43 29 54 38 78 Financial data, SEK m Revenues 1,306 2,950 3,129 1,357 1,671 1,831 1,757 1,727 1,542 1,743 Operating profit before depreciation 453 1,887 1,989 154 303 619 503 421 595 479 Operating profit 294 1,722 1,796 –40 76 383 268 100 195 56 Investments 278 265 277 305 338 285 372 268 201 313 Cash cost USc/lb Zn C1, Normal 48 76 65 79 64 69 72 69 68 75 Proven and probable miner. reserves Ktonnes 15,900 16,700 17,800 17,100 17,000 16,000 15,700 14,000 13,100 15,300 Zn, % 8.5 8.4 7.7 7.4 7.2 7.1 7.1 7.1 7.0 6.6 Pb, % 1.8 1.8 1.7 1.8 1.8 1.8 1.8 1.7 1.6 1.5

1) Comparison figures for 2012 have been restated due to changes in accounting regulations. Investments at Aitik increased by SEK 383 million. 2) Tellurium production started in 2012. 3) Aitik’s figures for 2013 are updated in accordance with the press release published on 6th May 2014. 4) The acquisition of Kylylahti was completed in October 2014.

118 BOLIDEN ANNUAL REPORT 2014 Ten-year overviews Ten-year overview – Smelters

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Metal production Zinc, Ktonnes 433 443 463 443 434 456 461 467 455 468 Copper, Ktonnes 348 356 315 350 302 303 336 339 325 347 Lead, Ktonnes 27 26 26 14 13 17 11 19 24 25 Lead alloys, Ktonnes (Bergsöe) 46 45 44 43 39 42 41 43 45 44 Gold, kg 20,439 19,693 14,876 15,489 15,028 14,220 12,848 16,175 16,177 17,368 Gold, troy oz. 657,128 633,144 478,274 497,972 483,157 457,168 413,052 520,011 520,094 558,382 Silver, kg 1) 468,630 414,402 379,749 488,285 539,564 450,280 488,147 575,959 537,941 626,767 Silver, ’000 troy oz.1) 15,067 13,323 12,209 15,699 17,346 14,476 15,964 18,517 17,294 20,151 Aluminium fluoride, Ktonnes 30 29 35 35 33 22 35 36 34 35 Sulphuric acid, Ktonnes 1,340 1,341 1,231 1,329 1,123 1,372 1,597 1,634 1,564 1,659

Financial data Revenues 20,826 37,514 34,704 31,256 26,765 34,390 38,471 38,753 33,410 35,894 Gross profit excl. revaluation of ­process inventory 2) 6,654 10,202 7,802 6,942 6,560 7,158 7,160 7,288 6,908 7,869 Operating expenses 4,147 4,471 4,618 5,076 5,281 5,247 5,358 5,330 5,346 5,370 Depreciation 755 765 771 807 888 848 823 891 913 1,012 Operating profit excl. revaluation of process inventory 2) 1,772 5,021 2,489 1,161 451 1,134 1,051 1,095 679 1,518 Operating profit 2,210 5,652 2,297 372 1,724 1,946 790 1,224 210 1,672 Investments 402 782 1,008 737 473 804 1,627 993 1,200 768 Capital employed 13,328 14,474 16,738 13,656 13,712 14,225 16,213 15,569 15,791 15,592

RÖNNSKÄR Smelting material Copper, Ktonnes Copper concentrate 606 587 598 611 565 544 651 624 605 661 Secondary raw materials 137 159 160 173 154 155 175 221 209 184 of which, electronics 3) 37 64 108 109 82 Copper, total 744 746 758 784 719 699 826 844 814 845 Lead, Ktonnes Lead concentrate 40 36 38 18 14 16 11 27 38 40 Secondary raw materials 4 4 2 5 7 6 5 2 1 1 Lead, total 44 39 40 22 21 23 17 29 39 41 Production Cathode copper, Ktonnes 223 229 214 228 206 190 219 214 206 217 Lead, Ktonnes 27 26 26 14 13 17 11 19 24 25 Zinc clinker, Ktonnes 35 33 36 41 39 37 36 36 36 39 Gold, tonnes 17 16 12 13 13 12 11 13 12 13 Gold, ‘000 troy oz. 546 506 389 432 427 400 341 403 402 419 Silver, tonnes 434 374 347 430 481 386 415 448 437 479 Silver, ‘000 troy oz. 13,947 12,023 11,142 13,813 15,472 12,340 13,344 14,395 14,051 15,392 Sulphuric acid, Ktonnes 580 551 544 557 515 502 571 553 536 564 Liquid sulphur dioxide, Ktonnes 35 37 50 53, 36 43 42 38 39 42 Palladium concentrate, tonnes 3 3 3 3 3 2 2 3 2 2 Financial data, SEK m Revenues 3,204 2,322 2,131 1,882 1,669 1,799 2,226 2,398 2,029 2,417 Operating profit before depreciation 564 1,075 846 637 338 441 715 832 374 748 Operating profit 364 861 615 395 83 187 470 535 53 405 Investments 153 318 228 192 199 270 1,074 481 345 147

BERGSÖE Smelting material, Ktonnes Secondary raw materials 65 59 61 65 57 56 57 62 63 63 Production, Ktonnes Lead alloys 46 45 44 43 39 42 41 43 45 44 Financial data, SEK m Revenues 530 787 918 760 632 793 787 698 715 783 Operating profit before depreciation 104 149 344 142 106 99 95 52 57 64 Operating profit 94 138 330 127 91 82 75 34 39 45 Investments 25 55 10 12 12 14 24 10 12 10

BOLIDEN ANNUAL REPORT 2014 119 Ten-year overviews

Ten-year overview Smelters, cont. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

HARJAVALTA Smelting material, Ktonnes Copper concentrate 521 538 451 529 400 434 456 516 471 551 Secondary raw materials 19 16 12 7 11 22 14 16 26 21 Copper, total 540 554 462 536 411 456 471 532 497 572 Nickel concentrate 156 205 262 273 211 262 259 248 251 239 Production Cathode copper, Ktonnes 124 127 101 122 97 113 116 125 119 130 Gold, tonnes 4 4 3 2 2 2 2 4 4 4 Gold, ‘000 troy oz. 111 128 90 66 56 57 72 117 119 139 Silver, tonnes 35 40 33 59 58 65 73 128 101 142 Silver, ‘000 troy oz. 1,119 1,300 1,067 1,886 1,876 2,077 2,350 4,122 3,244 4,577 Sulphuric acid, Ktonnes 566 632 557 659 501 573 600 639 590 658 Liquid sulphur dioxide, Ktonnes 41 43 42 37 33 27 35 37 37 37 Palladium concentrate, tonnes 0.92 0.71 0.46 0.21 0.27 0.72 0.84 0.54 1.47 1.91 Financial data, SEK m Revenues 4,000 1,915 1,267 1,432 1,261 1,468 1,552 1,666 1,631 1,746 Operating profit before depreciation 511 976 289 212 203 318 373 479 496 485 Operating profit before depreciation, excl. PIR 2) 511 976 289 339 62 318 373 479 496 485 Operating profit 357 820 149 64 24 154 222 324 316 279 Operating profit excl. PIR 2) 357 820 149 191 –117 154 222 324 316 279 Investments 91 211 366 225 148 122 229 215 246 225

KOKKOLA Smelting material, Ktonnes Zinc concentrate 547 548 581 576 571 587 600 589 602 577 Production, Ktonnes Zinc 282 282 306 298 295 307 307 315 312 302 Silver concentrate, kg – – – – – – – – – 5,651 Silver concentrate, ’000 troy oz. 182 Sulphuric acid 4) 199 302 313 319 314 Financial data, SEK m Revenues 1,319 2,713 2,523 1,848 1,979 2,062 1,818 1,778 1,795 2,004 Operating profit before depreciation 409 1,722 1,434 632 558 685 417 432 398 639 Operating profit 246 1,563 1,273 469 362 505 246 261 248 459 Investments 53 95 236 162 99 248 237 210 318 216

ODDA Smelting material, Ktonnes Zinc concentrate (incl. zinc clinker) 276 291 292 270 245 277 283 279 263 302 Production, Ktonnes Zinc 151 161 157 145 139 149 153 153 143 166 Aluminium fluoride 30 29 35 35 33 22 35 36 34 35 Sulphuric acid 193 158 130 113 108 123 125 128 119 123 Financial data, SEK m Revenues 858 1,636 1,441 1,200 1,123 1,128 1,212 1,184 1,070 1,395 Operating profit before depreciation 160 783 576 360 161 184 123 184 116 355 Operating profit 22 652 439 210 6 39 –25 31 –26 209 Investments 80 103 168 146 22 75 44 61 269 166

The operating profit per smelter excludes the revaluation of process inventory, with the exception of Harjavalta, 2008–2009.

1) Silver concentrate at Kokkola is included in the production figure shown as of 2014. 2) Process Inventory Revaluation. 3) Electronic scrap recycling was not reported separately between 2005 and 2009. 4) Investment in sulphuric acid plant, 2010.

120 BOLIDEN ANNUAL REPORT 2014 2015 Annual General Meeting

Boliden’s Annual General Meeting will be held on Tuesday, 5th May Complete convening notice 2015 in Garpenberg. A complete notice convening the Annual General Meeting, as well as financial and other information, can be found on Boliden’s website at Participation www.boliden.com. Printed financial information may also be ordered Shareholders wishing to participate in the Annual General Meeting via the website or from Boliden AB, Box 44, SE-101 20 Stockholm, must both be registered in the shareholders’ register kept by Euroclear Sweden. Sweden AB on Tuesday, 28th April 2015 (for details of the re-registration process for nominee shareholders, please see below) and have notified Financial information the company of their intention to participate, either via Boliden’s web- 5th May site, www.boliden.com, by calling the company on tel. +46 (0)8 32 94 29, Interim Report for the first quarter 2015 or by writing to the company at the following address: Boliden AB, Legal Affairs, Box 44, SE-101 20 Stockholm, Sweden. All such noti­ 17th July fications must be eceivedr by the company no later than Tuesday, Interim Report for the second quarter 2015 28th April 2015. Shareholders’ notifications of their intention to attend the Annual 23rd October General Meeting shall include the shareholder’s name, Civic ID no. or Interim Report for the third quarter 2015 corporate ID no., address and telephone number, and the number of assistants who will accompany them. The information provided will be 11th February 2016 computerised and used exclusively in connection with the Annual Fourth quarter Interim and Year-end Report 2015 General Meeting. Questions Nominee shareholders Any questions concerning the content of Boliden’s financial informa- In order to be entitled to participate in the Annual General Meeting, tion can be submitted to: nominee shareholders must, no later than Tuesday, 28th April 2015, Boliden’s Investor Relations have their shares temporarily re-registered in their own names with Tel. +46 8 610 15 00 or Euroclear Sweden AB. All such requests for registration in the share- e-mail: [email protected] holder’s own name must be submitted to the relevant trustee well ahead of this date.

Adresses

Group Boliden Garpenberg Boliden Kokkola Boliden Marketing Office Boliden Group SE-776 98 Garpenberg Box 26 UK Box 44 Street address: Kapplavägen 5 FI-67101 Kokkola No 7 Clarendon Place SE-101 20 Stockholm Tel. +46 225 360 00 Finland Royal Leamington Spa Street address: Fax +46 225 360 01 Tel. +358 6 828 6111 Warwickshire Klarabergsviadukten 90 CV32 5QL Tel. +46 8 610 15 00 Boliden Kylylahti Boliden Odda UK Fax +46 8 31 55 45 Kaivostie 9 Eitrheimsneset 1 Tel. +44 1926 833 010 Fax +46 8 30 95 36 FI- 83700 Polvijärvi NO-5750 Odda Fax +44 1926 450 084 (Legal Affairs staff function) Finland Norway Boliden Marketing Office Boliden Mines Tel. +358 10 271 0090 Tel. +47 53 64 91 00 Fax +47 53 64 33 77 Germany SE-936 81 Boliden Boliden Tara Stresemannallee 4c Tel. +46 910 77 40 00 Knockumber Boliden Harjavalta D-414 60 Neuss Fax +46 910 77 42 34 Navan Teollisuuskatu 1 Germany Co. Meath FI-29200 Harjavalta Tel. +49 2131 750 46 55 The Boliden Area Ireland Finland Fax +49 2131 750 46 54 SE-936 81 Boliden Tel. +353 46 908 2000 Tel. +358 2 535 8111 Tel. +46 910 77 40 00 Fax +353 46 908 2581 Fax +358 2 535 8239 Boliden Marketing Office Fax +46 910 77 42 25 Denmark Boliden Rönnskär Hvissinge vej 16 Boliden Aitik Boliden Smelters SE-932 81 Skelleftehamn DK-1600 Glostrup Sakajärvi 1 Staff Tel. +46 910 77 30 00 Denmark SE-982 92 Gällivare Box 750 Fax +46 910 77 32 15 Tel. +45 4326 8300 Tel. +46 970 72 90 00 SE-101 35 Stockholm Fax +46 970 72 90 01 Street address: Boliden Bergsöe Klarabergsviadukten 90 Box 132 www.boliden.com Tel. +46 8 610 15 00 SE-261 22 Landskrona Fax +46 8 610 15 51 Tel. +46 418 572 00 Fax +46 418 572 05

Production: Boliden in cooperation with Hallvarsson & Halvarsson. Photos: Stefan Berg, Neil Crighton (p. 10, 11, 29, 41), Miska Korpelainen, Visio Video Oy (p. 27), Lars de Wall (p. 39). Illustrations: Elina Anttila. Translation: Copy Right AB. Print: Larsson Offsettryck AB. ANNUAL REPORT 2014